BILL ANALYSIS

C.S.H.B. 3385

By: King

Licensing & Administrative Procedures

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The bill author has informed the committee that Texas is one of the highest wine-producing states in the United States, with more than 11,000 acres of vineyards and a viticultural history dating back to the 17th century, but that state law currently limits certain winery activities, such as the 35,000-gallon annual cap on certain wine sales and the number of off-site tasting rooms operated under a single permit. The bill author has also informed the committee that some Texas wineries and grape growers have expressed concern that these limitations may constrain the ability to expand direct-to-consumer sales, scale production using Texas-grown fruit, and streamline compliance. The bill author has further informed the committee that stakeholders have proposed the creation of a new permit structure to address these concerns and to align Texas more closely with other wine-producing states that have implemented similar farm winery models. C.S.H.B. 3385 seeks to address these issues, support local agriculture, increase in-state wine sales, and strengthen market access for producers committed to using Texas-grown products by creating a new farm winery permit, which provides enhanced operational flexibility for Texas wineries that produce wine primarily from Texas-grown fruit, and the Farm Winery Marketing Assistance Fund, a dedicated account in the general revenue fund to promote Texas farm wineries.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the Texas Alcoholic Beverage Commission in SECTION 1 of this bill.

ANALYSIS

Farm Winery Permit

C.S.H.B. 3385 amends the Alcoholic Beverage Code to create a farm winery permit. The bill restricts the issuance of a farm winery permit to the holder of a winery permit who produces wine that is bottled in Texas and is at least 75 percent by volume fermented juice of grapes or other fruit grown in Texas or a lesser percentage established by the commissioner of agriculture under applicable state law. In addition to the activities authorized for the holder of a winery permit issued under applicable state law, a holder of a farm winery permit issued under the bill's provisions may do the following:

· operate up to five locations off of the winery premises where the permit holder may sell Texas wine to ultimate consumers for consumption on the location's premises; and

· sell on the winery premises or at the described location off of the winery premises Texas wine to ultimate consumers in unbroken packages for consumption off the winery's or location's premises in an amount not to exceed 250,000 gallons annually.

C.S.H.B. 3385 requires the Texas Alcoholic Beverage Commission (TABC) to adopt rules to implement the bill's provisions relating to authorized activities under a farm winery permit, including rules that do the following:

· require the farm winery permit holder to notify TABC of each location off of the winery premises operated by the permit holder under the bill's provisions;

· establish a procedure to verify the wet or dry status of each such described location; and

· require the farm winery permit holder to provide any other information TABC determines necessary.

C.S.H.B. 3385 establishes that Alcoholic Beverage Code provisions applicable to the sale of Texas wine on the permitted premises of the holder of a farm winery permit apply to the sale of Texas wine at a location off of the winery premises authorized under the bill's provisions. The bill caps the fee for a farm winery permit at $500 annually and requires the revenue attributable to the fees collected under the bill's provisions to be deposited as follows:

· 50 percent to the credit of the farm winery marketing assistance fund; and

· the remainder to the credit of the general revenue fund.

C.S.H.B. 3385 requires TABC to adopt rules to administer the farm winery permit and establishes that the bill's provisions regarding the permit take effect on the effective date of those rules. The bill requires those rules to provide a reasonable amount of time after the rules' effective date for a holder of a farm winery permit issued before the rules' effective date to begin manufacturing wine and otherwise come into compliance with the rules.

Farm Winery Marketing Assistance Fund

C.S.H.B. 3385 establishes the farm winery marketing assistance fund as a dedicated account in the general revenue fund that consists of the following:

· legislative appropriations to TABC or the Department of Agriculture (TDA) for a purpose of the fund;

· money from farm winery permit fees;

· interest or other earnings on money credited to or allocable to the fund; and

· gifts, grants, including grants from the federal government, and donations received for the fund.

TDA may use money in the fund only to promote and market farm wineries permitted under the bill's provisions. The bill authorizes TABC to use money in the fund necessary to implement and administer the bill's permit provisions, including money necessary for the initial implementation of those provisions.

Rulemaking

C.S.H.B. 3385 requires TABC, as soon as practicable after the bill's effective date, to adopt rules to administer the bill's provisions.

EFFECTIVE DATE

On passage, or, if the bill does not receive the necessary vote, September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 3385 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

Whereas the introduced required the comptroller to deposit 50 percent of each collected permit fee to the credit of the general revenue fund and remit 50 percent of the collected fee to the credit of the farm winery marketing assistance fund, the substitute requires the revenue attributable to the fees collected under the bill's provisions to be deposited as follows:

· 50 percent to the credit of the farm winery marketing assistance fund; and

· the remainder to the credit of the general revenue fund.

The substitute includes the following provisions that were absent from the introduced:

· a specification that the fund consists of legislative appropriations to TABC for a purpose of the farm winery marketing assistance fund;

· an authorization for TABC to use money in the fund necessary to implement and administer the bill's permit provisions, including money necessary for the initial implementation of those provisions;

· a requirement for TABC to adopt rules to administer the bill's provisions relating to the permit and a provision establishing that those provisions take effect on the effective date of those rules; and

· a requirement for those rules to provide a reasonable amount of time after the rules' effective date for a holder of a permit issued before the rules' effective date to begin manufacturing wine and otherwise come into compliance with the rules.