EDITOR’S NOTE: This story was corrected after initial publication to clarify that the committee replaced the original House Bill 500 with a Proposed Committee Substitute before any debate began. We regret the error.
The clock ran out before House members had a chance to decide whether to loosen some rules on craft breweries that want to distribute their own beer. An 11th-hour attempt by wholesale distributors to block higher limits on self-distribution succeeded, even though the committee did not vote on the full measure.
For now, the revised version of House Bill 500 remains alive.
The Alcoholic Beverage Control Committee was considering a revised version of H.B. 500, in the form of a Proposed Committee Substitute, The original bill would have raised the cap on self-distribution from its current 25,000-barrel limit to 200,000 barrels. It also would have removed a separate provision making it easier for breweries that use a distributor to terminate their contract and do business with another wholesaler. (A barrel is 31 gallons.)
The PCS stripped both of those measures, leaving the cap at 25,000 barrels. Once a brewery raises production to that level, it must contract with a wholesale distributor to market all of its beer, not only the amount exceeding 25,000 barrels. Craft brewers approaching that threshold want the option to continue selling their own products.
The committee hearing room was packed with representatives of craft brewers, distributors, and their lobbyists. Distributors have fought to maintain the cap. They say the system works well and they have invested in storage, trucks, warehouse workers, and sales staff to deliver thousands of products to restaurants, bars, and retailers.
Several members of the committee were absent, however, including some who presumably would have rejected the PCS and killed the legislation.
Before discussion of H.B. 500 began, the committee approved House Bill 480, which would require craft breweries to follow the same tax reporting processes to the state ABC Commission alcohol retailers follow. Tax compliance reporting for all businesses and individuals goes through the Department of Revenue, but the ABC Commission tracks taxes paid by retailers that sell or serve alcoholic beverages.
Rep. Susan Fisher, D-Buncombe, suggested this was a needless regulation targeting small brewers. But the measure passed after Renee Metz, the ABC Commission’s general counsel, said the commission did not object to the process, even though it preferred to let the Department of Revenue continue handling all this information.
Then the committee took a seven-minute recess, with Chairman Jamie Boles, R-Moore, saying he wanted the primary sponsor of H.B. 500 and the PCS, Rep. Chuck McGrady, R-Henderson, to present and discuss the amended bill. McGrady was presenting a bill to another committee. Boles had asked for a motion to substitute the PCS for the original bill, and the committee passed it.
“This PCS is a shadow of its former self,” McGrady acknowledged on his arrival. But after removing the provisions that caused distributors the most consternation, he said the bill offered an incremental improvement worth supporting.
Margo Metzer, the head of the state’s Craft Brewers Guild, said her members were very disappointed in the revised bill but that her group still supported it.
Rep. Larry Potts, R-Davidson, asked a series of questions about whether the PCS would allow retail sales in dry counties of beer made at “farm breweries” — licensed breweries that grow and produce the ingredients of their beer on the property. It does. Wineries in dry counties can sell their vintages at their tasting rooms as well, and this would make the law consistent for farm breweries.
Then Boles suddenly announced the full House was opening its session and the committee had to adjourn before any further debate or votes.
Boles promised the committee would see the bill again.
If the ABC committee passes the PCS, it would go to the Rules Committee.