Update, Saturday, May 19 — Representative Ted Davis, Jr., has still not answered questions about the bill. He has, however, released a statement on Facebook.
NORTH CAROLINA—A bill filed in the General Assembly Wednesday would force new bars to either serve food or operate as non-profits; it would also dramatically increase penalties for violating ABC (Alcoholic Beverage Control Commission) regulations.
Representative Ted Davis is a primary sponsor of House Bill 944, entitled “ABC Regulation and Reform.” Davis did not return calls or emails seeking comment.
The bill as written would increase restrictions on issuing ABC permits and more than double fines for violating ABC laws; it would also re-write the state’s definition of a “private club.”
While private clubs are only one of many types of ABC permits, it is the permit that covers the vast majority of bars that do not serve food.
Rewriting ‘private club’ law
Specifically, the bill rewrites North Carolina General Statute 18B-1000. The statute sets out a variety of ABC permits, including grocery and retail store, as well as restaurants, which must demonstrate that they make at least 30 percent of their gross income from food and non-alcoholic beverages.
There are also several niche permits, including sports clubs–like golf courses, tennis courts and horse ranches–as well as veterans organizations, cooking schools and convention centers.
Bars which do not serve food are now defined as private clubs. Under North Carolina law, these clubs are not technically open to the public and are required to keep detailed membership records, charge membership fees, and check for membership before allowing customers to drink.
The law has long frustrated bar owners. Former Representative Susi Hamilton unsuccessfully tried to limit the law to larger establishments in 2014. The law has even fueled a cottage industry dealing with the paperwork and lines created by the ABC requirements.
House Bill 944 would redefine a private club as “an establishment that qualifies as a 501(C) business under the Internal Revenue Code and has been in operation for a minimum of 12 months prior to application for an ABC permit.”
The bill exempts ABC permits already in place by April 1, 2018. It does not rewrite or otherwise alter any of the other permit type definitions, nor does it add any new permit type to the general statutes.
What does the new definition mean?
So, what would the bill mean if it became law?
Essentially, it would require any new bar seeking an ABC permit to be owned by a business that had already been an operating non-profit 501(c) for at least a year. That would exclude any owner or LLC from opening a new bar if he or she intended to operate on a for-profit model, the way the vast majority of bars are run.
Even if an owner or LLC wanted to open a new bar as a non-profit venture, he or she would likely have to wait at least a year. The bill does not specify if that year would start from the non-profit’s founding date, or from the date the IRS recognized its non-profit status.
The other option left open by the bill is for a new business to open a full restaurant instead of just a bar. However, this requires a radically different business model, as well as an additional set of inspections and permits from county health departments.
A business person who switched models – from bar to restaurant – would also undoubtedly face a host of logistical issues, including building, equipping and staffing a kitchen.
While the bill exempts current permits, it is unclear if those current permits would be transferable; that is, the bill doesn’t specify if a permit would still be grandfathered under the old private club law if it was inherited or purchased by a new owner.
State Senator Andy Wells, who sponsored the identical Senate version of the bill – SB 714 – said the details of how grandfathered permits could be transferred would be worked out in committee.
“That’s something that would be best addressed in committee and discussions with ABC, but I’ll be sure that question is asked,” Wells said.
Stricter penalties for existing businesses
The bill also increases penalties for existing establishments. It dramatically increases penalties for ABC law violations, raising first offense fines from $500 to $1,350, second offense fines from $750 to $2,100 and third offense fines from $1,000 to $2,750.
Current laws also allow the ABC to accept a “compromise” payment from a business in lieu of suspending or revoking a payment; the bill would double the maximum compromise payment from $5,000 to $10,000.
The bill would also:
- Allow the ABC to “impose conditions on the operation hours” of a business in violation of alcohol laws
- Require the owner of a business to be at least 25 years old in order to hold a permit; the age requirement is currently 19
- Transfer the ability to determine a business or location “no longer suitable” from the ABC itself to an administrative law judge, and redirect appeals of such action to the state’s Office of Administrative Hearings.
- Require the ABC to suspend permits for 30 days if they are notified by local law enforcement of an investigation into a business; the current law only grants that power to the state’s Alcohol Law Enforcement agents and local ABC Board members
How House Bill 944 came to be
House Bill 944 was sponsored by Representatives Ted Davis Jr. and James L. Boles Jr.; the counterpart Senate Bill 714 was sponsored by Senators Andy Wells, Shirley B. Randleman and Republican Joint Caucus Leader Norman W. Sanderson.
The bill was recommended by the Joint Legislative Oversight Committee on Justice and Public Safety. Boles, Davis and Randleman are the three co-chairs of the committee; State Senator Michael Lee is also a member of that committee, although he is not listed as a sponsor of the Senate bill.
According to Wells, who represents Catawba and Alexander counties, a series of shootings in front of Hickory-area businesses that serve liquor was the inspiration for the move to essentially eliminate what he called “liquor bars.”
Wells specifically cited a shooting in early April at The Vault Bar & Lounge in Hickory – one person was killed and three were injured – that, according to Wells, occurred in large part because the establishment served liquor and not food.
“It’s the fifth shooting in Hickory. Some of these places are fine until they stop serving food — then it’s trouble,” Wells said.
Wells said he believed establishments that only serve beer and wine were not responsible for as many issues; he confirmed that the bill’s provision requiring private clubs would eliminate what he called “liquor bars” throughout the state.
“This brings us in line with our neighbors South Carolina and Virginia,” Wells said, adding that if “people feel they want liquor bars then someone should write a separate piece of legislation authorizing that.”
Wells called the state’s 30 percent gross receipt requirements “a low bar,” and did not consider it onerous to businesses, adding, “if people are going to be sitting at the bar for three or four hours it’s probably a good idea for them to eat something.”
The bill also appears to stem at least in part from a Nov. 16, 2017 meeting of the committee.
During that meeting, Renee C. Metz, chief counsel for ABC, gave a presentation identifying the difficulties in successfully revoking permits for businesses and locations identified as unsuitable. The presentation referred to the situation as an “uphill battle.”
All of the sponsors of this bill–in both the House and Senate–were contacted for comment. Randleman, the sole respondent before publication, deferred inquiries to Wells.
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