Another Round! – Second Set of Changes to Liquor Code Take Effect on January 16, 2017

Contributed by Kenneth J. McDermott

Although short of complete liquor privatization in Pennsylvania, 2016 saw some of the most significant changes to the Commonwealth’s liquor laws in decades.  In June of 2016, House Bill 1690 went from a bill that was dead in the water to passage and the Governor’s signature in approximately twenty-four hours — an unheard of speed for legislation in Pennsylvania.  With the Governor’s signature, House Bill 1690 became Act 39, which was effective as of August 8, 2016.  The changes to the Liquor Code were substantial, though its provisions allowing restaurant liquor license holders (including grocery stores with liquor licenses) to sell wine to go were the most publicized.  A summary of all of the changes can be found at our alcohol industry blog:  www.PaAlcoholLaw.com.

Act 39 was a surprise to the industry and caught many off-guard.  Given the speed with which it was passed through the General Assembly, there was little time to fully-evaluate the law prior to its passage.  Consequently, there were a number of issues that bubbled up once those in the industry began reviewing its language.  Others in the alcohol industry, mainly beer distributors, felt that everyone received some benefit from the law change except them.  Accordingly, fresh on the heels of Act 39’s re-write of the Liquor Code, the General Assembly began using House Bill 1196 as a vehicle to correct some issues discovered with Act 39, and also to make another round of changes to Pennsylvania’s liquor laws.

House Bill 1196 took a much longer tract to passage, but was eventually signed into law by the Governor on November 15, 2016, becoming Act 166.  Act 166 was effective in 60 days, which means its provision go into effect on January 16, 2016.  Although received with a little less fanfare than its predecessor, Act 166 will have an important impact on the alcohol industry in Pennsylvania.  Here are a few of its most prominent provisions:

  1. Gives breweries or wineries making alcoholic cider more flexibility in the carbonation levels of their cider (Act 36 also allowed a higher alcohol percentage for alcoholic cider).
  2. Includes specific provisions for the production of mead, which previously was not mentioned in the Liquor Code.
  3. Cleans up some provisions for licensees who wish to have a “Mug Club.” (Act 39 required licensees to charge a fee to be in the Mug Club and required the member to use the same glass on every visit. These are no longer required.)
  4. Permits investors to own up to 10% of a licensed entity without running afoul of certain interlocking business prohibitions.
  5. Allows distributors to sell beer in any amount to individuals for off-premises consumption, including individual bottles and growlers.
  6. Requires breweries to report sales figures to the Liquor Control Board, which will be posted on a public database.
  7. Allows out-of-state retailers and wholesalers to obtain a license to ship beer into Pennsylvania directly to consumers.
  8. Grants breweries the ability to sell beer produced by another Pennsylvania-licensed brewery, in addition to wine produced by Pennsylvania-licensed limited wineries and liquor produced by Pennsylvania-licensed limited distilleries.
  9. Sets a 50% cap on a brewery, winery, or distillery’s sales of others’ alcohol products – i.e., a brewery’s sales of another brewery’s beer, a limited winery’s wine, and/or a limited distillery’s liquor in a given year cannot exceed 50% of the brewery’s sales of its own beer.

These recent changes to the Liquor Code open a number of opportunities for businesses involved in the alcohol industry.  If you would like to discuss these changes or any other aspect of your business, feel free to contact Ken McDermott or any of our attorneys in our Alcoholic Beverages/Liquor Licensing Practice Group.