News: CJ Exclusives

ABC Omnibus Regulatory Reform takes big step in revamping way N.C. controls liquor

Editor’s note: This story was updated at 3:30 p.m. on Tuesday, April 2.

A bill filed Tuesday, April 2, in the N.C. House would dramatically revamp how the state governs liquor sales and distribution, including a provision allowing for Sunday sales.

Distillers, brewers, and consumers would be among the beneficiaries of the expansive measure, modernizing a system entangled in arcane laws dating back to the end of Prohibition.

Reps. Chuck McGrady, R-Henderson; James Boles, R-Moore; Susan Fisher, D-Buncombe; and Jon Hardister, R-Guilford, are primary sponsors.

Lawmakers have already introduced several items presented in Tuesday’s bill, such as a move — House Bill 389 — to authorize public colleges and universities to allow the sale of alcohol at stadiums, athletic facilities, and arenas on school property, as well as a move paving the way for Sunday sales — Senate Bill 87.

The omnibus measure introduced Tuesday, H.B. 536, ABC Omnibus Regulatory Reform, would, for example, allow distillers to sell spirituous liquor directly to consumers in other states and removes a limit on sales to customers visiting one of the nearly 60 craft distilleries in the state. As it stands, customers can buy five bottles from a distillery per year. All sales now are recorded and tracked.

The bill also would allow tastings in state-run ABC stores and provides a local option for cities and counties to adjust store hours, including for Sunday sales.

Even when nationwide Prohibition ended with passage of the 21st Amendment in 1933, North Carolina didn’t ratify it. It wasn’t until 1937, when the N.C. Alcoholic Beverage Control Commission system was set up to sell alcohol in N.C. counties, that Prohibition officially ended in the state. The state allowed breweries and wineries to operate shortly after Prohibition, but North Carolina lawmakers didn’t lift the ban on making liquor until 1979.

Even then, the first distillery didn’t begin operating until 2005.

North Carolina is one of just 17 control states in the country and the only state that confers liquor oversight to local boards — nearly 170 of them — which govern operations in their respective jurisdictions.

The state has taken steps in recent years to ease restrictions on liquor, starting with a law enacted in 2015 allowing distilleries to sell directly to customers. Religious groups and the ABC itself have resisted the changes.

The Distillers Association of North Carolina, calling the state’s system of controlling liquor “an 80-year-old regulatory scheme,” has urged lawmakers to reform and modernize the antiquated system.

Such moves, DANC says in a statement, would be to the “benefit of our state and its citizens.”

“The state’s distillers are denied the right to self-distribute and the right to directly sell to consumers. Instead, they are forced to use a cumbersome state monopoly for both distribution and sales,” DANC says.

In February, Sens. Joyce Waddell, D-Mecklenburg, and Andy Wells, R-Catawba, filed legislation based on recommendations by the N.C. Program Evaluation Division, which presented a report — “Changing how North Carolina Controls Liquor Sales has Operational, Regulatory, and Financial Ramifications.”

S.B. 87 — and its companion, House Bill 91 — would require the merger of N.C. ABC Commission systems in a county with two or more ABC systems. House Bill 99, and Senate Bill 78, would establish Alcohol Law Enforcement as a separate division under the Department of Public Safety, as well as to clarify the jurisdiction and primary responsibilities of ALE agents.

Another bill, focusing on enforcement, has passed in the Senate.

That measure, Senate Bill 11, introduced by Sen. Andy Wells, R-Catawba, was introduced, in large part, because of a spate of shootings and killings outside three Catawba County bars between April 2017 and April 2018. It is moving in the House.

For brewers, H.B. 536 would open farmers markets to tastings of malt beverage and allow brewers and other producers to sell merchandise such as hats, T-shirts, and glasses. It also eases restrictions on delivery between producers and buyers, apart from the cumbersome ABC warehousing system.

On March 14, a pair of bills that, if passed into law, would even further energize North Carolina’s thriving craft beer market.

Collaboration, common ground, and a collective win for all were common refrains from speakers, including House Rules Committee Chairman David Lewis, R-Harnett, a primary sponsor of House Bill 363, Craft Beer Distribution and Modernization Act.

That measure and its companion, Senate Bill 246, maintain the current three-tier system — producers, wholesalers, and retailers — and adds a new, mid-level classification of brewers to state law. Brewers, under the proposals, could self-distribute 50,000 barrels of their products, as opposed to the current 25,000.

Breweries that exceed 50,000 would not lose the ability to self-distribute, although the new law would affect only those breweries that sell fewer than 100,000 barrels of beer per year. Now, if a brewer sells 25,001 barrels per year, by state law, every barrel produced — including the first — must go through a third-party wholesaler/distributor.

“It gives us essentially what other businesses, small businesses outside the alcohol industry, already have,” said Todd Ford, co-founder of NoDa Brewing Co. in Charlotte.

The House Committee on Alcoholic Beverage Control met on Tuesday to address H.B. 363 and H.B. 389, both of which have moved on in House committees — to Rules and Finance, respectively.