HBA-TYH C.S.H.B. 3555 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 3555 By: Wilson Licensing & Administrative Procedures 4/30/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE The U.S. Constitution gives the state authority to regulate the manufacture, distribution, sale, use, possession, and transportation of alcoholic beverages. Accordingly, Texas has adopted an Alcoholic Beverage Code (code). C.S.H.B. 3555 modifies several provisions within that code governing the regulation of alcoholic beverages. This bill modifies the definition of legislative appropriations for the purpose of regulation of alcoholic beverages; modifies provisions relating to the expiration of secondary permits; adds requirements for verification by the Texas Alcoholic Beverage Commission (commission) and notification to wholesalers of an expired or suspended retailer's permit; adds provisions allowing a wholesaler or distributor to rely on a written affirmation of a retailer's permit status requirements. This bill increases the allowable percentage of alcoholic content for wine from 14 percent to 17 percent by volume, modifies local option provisions to conform to that change, and modifies other regulations governing the sale of wine. It also contains provisions relating to the relationship between manufacturers and distributors of certain alcoholic beverages and creates a Class A misdemeanor offense for the shipment of any alcoholic beverage directly to a Texas resident by a person from another state or country who sells alcoholic beverages. This bill creates an advisory committee to make recommendations for an alcoholic awareness program in Texas schools. Under current federal law, states are required to enact and enforce laws that meet the requirements for the Open Container Program. Under the program, if the state provisions are not in place and enforced by October 1, 2001, Texas could lose its ability to spend construction dollars for traffic congestion relief and other highway construction projects. C.S.H.B. 3555 contains provisions that will bring Texas into compliance with federal law by banning open containers in a motor vehicle on a public highway, right-of-way, or rest area. This bill also prohibits an accident or offense from being classified as being caused by the use of drugs or alcohol unless that is determined to be the proximate cause of the accident or offense. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 5.50, Alcoholic Beverage Code, by adding Subsection (e), as follows: (e) Provides, for the purposes of Subsection (b), which requires fees and surcharges to be set at a level anticipated to be equal to legislative appropriations, exceptions to the term "the legislative appropriation to the commission for the regulation of alcoholic beverages." SECTION 2. Amends Section 11.09, Alcoholic Beverage Code, as follows: Sec. 11.09. New title: EXPIRATION OR SUSPENSION OF PERMIT. Provides that a secondary permit that requires the holder of the permit to first obtain another permit, including a late hours permit, expires on the same date the basic or primary permit expires. Prohibits the Alcoholic Beverage Commission (commission) from prorating or refunding any part of the fee for the secondary permit if the application of this section results in the expiration of the permit in less than one year. Provides that an action by the commission resulting in the suspension of a basic or primary permit also acts to suspend any secondary permit held by the holder of the basic or primary permit. SECTION 3. Amends Subchapter A, Chapter 11, Alcoholic Beverage Code, by adding Section 11.091, as follows: Sec. 11.091. NOTIFICATION OF EXPIRED OR SUSPENDED PERMIT. (a) Requires the commission to verify that the holder of an expired or suspended retail permit is not operating in violation of this code. Provides that the verification, including any inspection of the premises by commission personnel, must occur within a reasonable time after the date the permit expires or is suspended. (b) Requires the commission to promptly notify each wholesaler, as that term is ordinarily used and understood in Section 102.01 (Tied House Prohibited), who regularly supplies retailers in the geographic area that the holder's retail permit has expired or has been suspended. SECTION 4. Amends Subchapter C, Chapter 11, Alcoholic Beverage Code, by adding Sections 11.72 and 11.73, as follows: Sec. 11.72. AFFIRMATION OF COMPLIANCE. Prohibits a person who holds a permit under Chapter 19 (Wholesaler's Permit), 20 (General Class B Wholesaler's Permit), 21 (Local Class B Wholesaler's Permit), or 23 (Local Distributor's Permit) from being subject to an administrative sanction for selling or delivering an alcoholic beverage to a retailer not authorized to purchase and receive the alcoholic beverage if the permit holder reasonably believes that the retailer is authorized to purchase and receive that type of alcoholic beverage, and obtains from the retailer at the time of delivery a written affirmation that the retailer is authorized to purchase and receive the type of alcoholic beverage sold and delivered by the permit holder. Sec. 11.73. DISCIPLINE FOR ACTIONS OF AGENT. Authorizes the commission or administrator to suspend or revoke the permit of a person who is represented by the holder of an agent's permit as described by Section 35.01 (Authorized Activities)or otherwise discipline the person based on an act or omission of the holder of an agent's permit only if an individual employed by the person in a supervisory position was directly involved in the act or omission of the holder of an agent's permit, had notice or knowledge of the act or omission, and failed to take reasonable steps to prevent the act or omission. SECTION 5. Amends Section 24.07, Alcoholic Beverage Code, to increase the alcohol percentage limit for wine from 14 to 17 percent by volume. SECTION 6. Amends Section 25.01, Alcoholic Beverage Code, to make conforming changes. SECTION 7. Amends Section 25.09, Alcoholic Beverage Code, to make conforming changes. SECTION 8. Amends Section 26.01, Alcoholic Beverage Code, to make conforming changes. SECTION 9. Amends Section 27.01, Alcoholic Beverage Code, to make conforming changes. SECTION 10. Amends Section 27.11, Alcoholic Beverage Code, to make conforming changes. SECTION 11. Amends Section 42.01(a), Alcoholic Beverage Code, to authorize the transport of liquor by certain licensed individuals in a vehicle owned or leased by the holder of a permit issued under Chapter 35 (Agent's Permit). SECTION 12. Amends Section 61.03, Alcoholic Beverage Code, as follows: Sec. 61.03. New title: EXPIRATION OR SUSPENSION OF LICENSE. (a) Prohibits a license from being issued, rather than authorizes a license to be issued, for a term longer than one year, except as provided by Subsection (b). (b) Provides that a secondary license which requires the holder of the license to first obtain another license, including a late hours license, expires on the same date the basic or primary license expires. Prohibits the commission from prorating or refunding any part of the fee for the secondary license if the application of this section results in the expiration of the license in less than one year. (c) Provides that an action by the commission resulting in the suspension of a basic or primary license also acts to suspend any secondary license held by the holder of the basic or primary license. SECTION 13. Amends Subchapter A, Chapter 61, Alcoholic Beverage Code, by adding Section 61.031, as follows: Sec. 61.031. NOTIFICATION OF EXPIRED OR SUSPENDED LICENSE. (a) Requires the commission to verify that the holder of an expired or suspended retail license is not operating in violation of this code. Provides that the verification, including any inspection of the premises by commission personnel, must occur within a reasonable time after the date the license expires or is suspended. (b) Requires the commission to promptly notify each wholesaler, as that term is ordinarily used and understood in Section 102.01 who regularly supplies retailers in the geographic area that the holder's retail license has expired or has been suspended. SECTION 14. Amends Subchapter C, Chapter 61, Alcoholic Beverage Code, by adding Sections 61.86 and 61.87, as follows: Sec. 61.86. AFFIRMATION OF COMPLIANCE. Prohibits a person who holds a license under Chapter 64 (General Distributor's License), 65 (Local Distributor's License), or 66 (Branch Distributor's License) from being subject to an administrative sanction for selling or delivering an alcoholic beverage to a retailer not authorized to purchase and receive the alcoholic beverage if the license holder reasonably believes that the retailer is authorized to purchase and receive that type of alcoholic beverage, and obtains from the retailer at the time of delivery a written affirmation that the retailer is authorized to purchase and receive the type of alcoholic beverage sold and delivered by the license holder. Sec. 61.87. DISCIPLINE FOR ACTIONS OF AGENT. Authorizes the commission or administrator to suspend or revoke the license of a person who is represented by the holder of an agent's license as described by Section 35.01 (Authorized Activities)or otherwise discipline the person based on an act or omission of the holder of an agent's license only if an individual employed by the person in a supervisory position was directly involved in the act or omission of the holder of an agent's license, had notice or knowledge of the act or omission, and failed to take reasonable steps to prevent the act or omission. SECTION 15. Amends Section 102.07, Alcoholic Beverage Code, is amended by amending Subsection (a) and adding Subsection (g) to read as follows: (a) Makes conforming changes. (g) Provides that Subsection (a) does not prohibit a permittee covered under Subsection (a) from prearranging or preannouncing a promotional activity otherwise permitted by this code with a retailer about a promotional activity to be held on the retailer's premises. Authorizes a holder of wholesaler's or class B wholesaler's permit to prearrange a promotional activity only for distilled spirits or wine. Prohibits a permittee from preannouncing a promotion to a consumer, if the permittee is the holder of a wholesaler's or class B wholesaler's permit, or preannouncing the purchase of wine or distilled spirits to a consumer. SECTION 16. Amends Subchapter D, Chapter 102, Alcoholic Beverage Code, by adding Section 102.775, as follows: Sec. 102.775. ARBITRATION LOCATION. Provides that if arbitration is used to settle a dispute between a manufacturer and a distributor, the arbitration proceeding must be conducted in the county in which the distributor's principal place of business is located unless the parties agree, at the time of the arbitration, to another location. SECTION 17. Amends Section 107.07(f), Alcoholic Beverage Code, as follows: (f) Provides that an offense under this subsection is a Class A misdemeanor unless it is shown at the trial of the offense that the person shipped an alcoholic beverage or caused an alcoholic beverage to be shipped after the person received written notice from the commission that the person was violating this subsection, in which event the offense is a state jail felony. Makes a nonsubstantive change. SECTION 18. Amends Sections 251.14(a) and (e), Alcoholic Beverage Code, to make conforming changes. SECTION 19. Amends Subchapter D, Chapter 251, Alcoholic Beverage Code, by adding Section 251.81, as follows: Sec. 251.81. SALE OF WINE. Provides that if the sale of wine was approved in an area by a local option election, other than a local option election that approved the sale of all alcoholic beverages, before September 1, 1999, an alcoholic beverage license or permit holder is prohibited from selling in that area wine containing more than 14 percent alcohol by volume unless a subsequent local option election approves the sale of wine or wine and other alcoholic beverages. Requires the commission, on the face of each alcoholic beverage license or permit, to indicate whether the holder may sell wine and, if the license or permit holder may sell wine, whether the holder may sell wine up to 14 percent alcohol or 17 percent alcohol by volume. SECTION 20. Amends Subchapter Z, Chapter 33, Education Code, by adding Section 33.904, as follows: Sec. 33.904. ALCOHOL AWARENESS PROGRAM. (a) Requires the Texas Education Agency (agency) to assist a seven-member advisory committee appointed by the governor in developing recommendations for the creation of a model curriculum for raising alcohol awareness among students in the schools in this state. Requires the curriculum recommendation, along with any recommendations for funding from the General Appropriations Act, to be reported to the presiding officer of each house of the legislature not later than the 90th day before the date on which the legislature convenes in each regular session. (b) Requires the governor to appoint the commissioner of education as the presiding officer of the advisory committee. Requires the governor, in making the remaining appointments, to attempt to appoint members from various geographic regions of the state representing members from various geographic regions of the state representing the diversity of the citizens of this state. (c) Provides that the terms of the advisory committee members end on the date the committee's recommendations are reported. SECTION 21. Amends Section 49.03, Penal Code, as follows: Sec. 49.03. CONSUMPTION OR POSSESSION OF ALCOHOLIC BEVERAGE IN MOTOR VEHICLE. (a) Deletes the condition that a peace officer must observe a person consuming an alcoholic beverage while operating a motor vehicle in a public place in order for the actor to commit an offense. (b) Establishes that an occupant of a motor vehicle located on a public highway, rest area, comfort station, picnic area, roadside park, or scenic overlook commits a Class C misdemeanor if that person consumes an alcohol beverage, or possesses in the passenger area a bottle, can, or other receptacle that contains an alcoholic beverage and has been opened, has a broken seal, or has the contents partially removed. (c) Establishes that it is an affirmative defense to prosecution under Subsection (b), that the person consuming an alcoholic beverage or the receptacle containing the alcoholic beverage is in the possession of a passenger in the living quarters of a house coach or house trailer; a passenger in a motor vehicle designed, maintained, or used primarily for the transportation of persons for compensation. (d) Created form existing text. SECTION 22. Prohibits a state agency or political subdivision, in collecting, compiling, or publishing data or statistical information related to violations of any penal law of this state or to highway and traffic offenses, from categorizing or classifying an accident, crime, offense, incident, or activity as being caused by or otherwise related to the use of drugs or the consumption of alcoholic beverages by or the mental impairment of a person involved in the accident, crime, offense, incident, or activity unless the use, consumption, or impairment is determined to be the proximate cause of the accident, crime, offense, incident, or activity. SECTION 23. Repealer: Sections 22.09 and 24.08, Alcoholic Beverage Code. Both sections limit the volume of alcoholic beverage sold in a single transaction. SECTION 24. Provides that Sections 11.72 and 61.86, Alcoholic Beverage Code, as added by this Act, apply only to a sale or delivery of an alcoholic beverage on or after the effective date of this Act. SECTION 25. Provides that Sections 11.73 and 61.87, Alcoholic Beverage Code, as added by this Act, apply only to an act or omission of the holder of an agent's permit under Chapter 35, Alcoholic Beverage Code, or of an agent's beer license under Chapter 73, Alcoholic Beverage Code, that occurs on or after the effective date of this Act. SECTION 26. Makes application of Section 107.07, Alcoholic Beverage Code, as amended by this Act prospective. SECTION 27. Makes application of Section 49.03, Penal Code, as amended by this Act prospective. SECTION 28. Effective date: September 1, 1999. SECTION 29. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original bill by adding new SECTIONS 16 (Arbitration Location), 20 (Alcohol Awareness Program), 21 (Consumption or Possession of alcoholic Beverage in a Motor Vehicle), 22 (compilation of data relating to accidents or offenses), and 27 (transition language for SECTION 21). For a complete analysis of these new sections, please see the Section-by-Section Analysis. The substitute modifies the original bill by deleting SECTIONS 15 and 17 of the original bill. SECTION 15 of the original bill made conforming changes. SECTION 17 of the original bill authorized a manufacturer or distributor to file a copy of any agreement entered into under this subchapter (Beer Industry Fair Dealing Law) with the commission, and required an agreement entered into renewed, or amended after September 1, 1999, to contain, on the front page of the agreement, information on whether any portion of the agreement is subject to arbitration or subject to Chapter 26 (Statute of Frauds), Business & Commerce Code. The substitute modifies the original bill by redesignating SECTIONS 16, 18, 19, 20, 21, 22, 23, 24, 25 (effective date), and 26 (emergency clause) of the original bill to SECTIONS 15, 17, 18, 19, 23, 24, 25, 26, 28, and 29, respectively The substitute modifies the original bill in SECTION 2 (Section 11.09, Alcoholic Beverage Code), which requires secondary permits to expire on the same date as the primary permit, by deleting reference to "temporary permit." The substitute modifies the original bill in SECTION 3 by deleting proposed Subsections (c) and (d), Section 11.091, Alcoholic Beverage Code, which prohibited a wholesaler from being charged with or being held liable for a violation of this code relating to the sale of alcoholic beverages to a non-permitted premise if the commission has not notified the wholesaler, and provided that this section does not apply if the holder of a retail permit has timely filed a renewal application and is operating during the pendency of the renewal application subject to this code and the regulations of the commission. The substitute also modifies the original bill in SECTION 3 (proposed Section 11.091, Alcoholic Beverage Code) by changing the section title from "Notification of Expired or Suspended Permit; Liability for Unauthorized Sale" to "Notification of Expired or Suspended Permit." The substitute modifies the original bill in SECTION 4 (proposed Section 11.72, Alcoholic Beverage Code) by prohibiting a person who holds a permit under Chapter 19, 20, 21, or 23 from being subject to administrative sanctions, rather than from being held liable, for selling or delivering an alcoholic beverage to a retailer not authorized to purchase and receive the alcoholic beverage. The substitute modifies the original bill in SECTION 12 (Section 61.03, Alcoholic Beverage Code), which requires secondary licenses to expire on the same date as the primary license, by deleting reference to "temporary license." The substitute modifies the original bill in SECTION 13 by deleting proposed Subsections (c) and (d), Section 61.031, Alcoholic Beverage Code, which prohibited a wholesaler from being charged with or being held liable for a violation of this code relating to the sale of alcoholic beverages to an unlicensed premise if the commission has not notified the wholesaler, and provided that this section does not apply if the holder of a retail permit has timely filed a renewal application and is operating during the pendency of the renewal application subject to this code and the regulations of the commission. The substitute also modifies the original bill in SECTION 13 (proposed Section 61.031, Alcoholic Beverage Code) by changing the section title from "Notification of Expired or Suspended License; Liability for Unauthorized Sale" to "Notification of Expired or Suspended License." The substitute modifies the original bill in SECTION 14 (proposed Section 61.86, Alcoholic Beverage Code) by prohibiting a person who holds a permit under Chapter 64, 65, or 66 from being subject to administrative sanctions, rather than from being held liable, for selling or delivering an alcoholic beverage to a retailer not authorized to purchase and receive the alcoholic beverage.