Washington Wine, Beer & Distilleries Law Seminar - March 15, 2012
Please join us for our inaugural Washington Winery, Brewery & Distillery law seminar at the Columbia Winery in Woodinville, Washington on Thursday, March 15.
Panels to include these hot topics, plus much more:
- Privatization/I-1183
- Trademarks
- Employment Laws
- Tasting Room Operations
- Taxes
For more information and registration visit: http://www.stoel.com/showevent.aspx?Show=9199
Idaho Wine, Beer & Distilleries Law Seminar - Thursday, March 1, 2012
Please join us for our inaugural Idaho Wine, Beer & Distillers law seminar at the Boise Centre in Boise, ID on Thursday, March 1, 2012. .jpg)
Panels to include these hot topics, plus much more:
- Start-ups (licensing, permitting and business formation)
- Trademarks (protecting your investment)
- Distribution and other key contracts
- Land use issues
- Employee matters
For registration visit: http://www.stoel.com/showevent.aspx?Show=9156
5th Annual Oregon Wine Law Seminar - February 16, 2012
Please join us for our 5th Annual Oregon Wine Law Seminar at the Allison Inn and Spa in Newberg, Oregon on Thursday, February 16.
Topics and panels include start-ups, trademark registration, employment, privatization of OLCC liquor sales, land use and a panel discussion on alternating premises (wine/beer/spirits). This seminar is complimentary to all industry members. Topics will apply to wineries, breweries and distilleries.
For agenda and registration visit: http://www.stoel.com/showevent.aspx?Show=9155
A Check-In with the Idaho Wine Industry
An update from our colleagues Allison Blackman and Nicole Hancock:
The State of Idaho is most infamously know for the potato but the recently reenergized Idaho Wine Commission, vintners, and wineries across the state hope to soon add Idaho Wines to the Gem State's reputation.
Idaho wines regularly net honors in regional and national competitions, and the media are increasingly taking notice. "They want something new to write about, and that's us," says Executive Director of the Idaho Wine Commission, Moya Shatz. The October issue of Sunset magazine sports a feature story headlined: "Discover new wine country: In Idaho's low-key Snake River Valley, the wine is getting seriously good."
Idaho is steadily earning a reputation for growing and producing vinifera wine grape varieties such as syrah and viognier, as well as classic varieties including merlot, cabernet sauvignon, chardonnay and riesling.
Continue Reading...TTB Publishes Notice of Rulemaking for Inwood Valley AVA
On December 5, 2011, the TTB published a Notice of Proposed Rulemaking (Notice No. 125) regarding the establishment of the Inwood Valley Viticultural Area in Shasta, California. If established, the new AVA would consist of a 28,000 acre area, the vast majority of which is currently not dedicated to, or known for, vineyards. The TTB invites comments on the proposed rulemaking, with any comments due on or before February 3, 2012. A full version of the Notice and the documents relating to the underlying Petition can be found here.
State Law Restrictions on Direct Sales to Consumers Are Ripe for Challenge
In the 2005 case Granholm v. Held, the U.S. Supreme Court struck down Michigan and New York laws that effectively prevented out-of-state wineries from shipping directly to in-state consumers but that allowed in-state wineries to conclude in-state direct sales. The Court held that these laws violated the U.S. Constitution’s Commerce Clause. Since then, lower federal courts around the country have had the tools to strike down similar state laws that facially discriminate against out-of-state producers without a permissible justification. For example, federal courts have struck down or enjoined facially discriminatory statutes—or selected provisions of such laws—in states such as Indiana, Kentucky, Massachusetts, New Jersey, Pennsylvania, Tennessee, and Texas.
But these rulings do not apply consistently across the country. For example, although the Sixth Circuit held unconstitutional Kentucky’s law requiring direct sales to be made only pursuant to in-person purchases, Indiana’s law requiring similar in-person sales remains on the books. And a number of other states retain laws restricting direct sales that appear legally dubious in the wake of Granholm and its progeny. But Granholm also has spurred Congressional attempts to restrict its reach. In 2010 and 2011, legislators introduced the Community Alcohol Regulatory Effectiveness (“CARE”) Act in the U.S. House of Representatives. In its latest iteration the bill aims to eliminate the federal statutory requirement that imported alcohol be subject to state laws “to the same extent and in the same manner” as alcohol produced in-state. The original version of the CARE Act did not survive the life of the last Congress, and it is unclear if the current version will find any more support in the present one. But notwithstanding this threat to direct shipping by out-of-state producers, overly restrictive state laws favoring in-state direct sellers remain ripe targets for litigation seeking to enforce Granholm and its reading of the Commerce Clause.
UC Davis Holds Wine Law Conference
I recently attended the UC Davis Wine Law Conference, held at the UC Davis School of Law. The conference's main focus was intellectual property and European imports/exports, as well as the affects of recent changes in the European Union rules regarding wine IP, with a specific focus on Italy. Panelists also discussed the affects of international beverage counterfeiting and how multinational parties can and should reach consensus on trade rules. The discussions were frank, sometimes even contentious, but overall very productive. The conference drew numerous high-level attendees, including members of the legal community, industry stakeholders, and regulatory agencies from both the United States and abroad.
IRS Publishes New Audit Technique Guide for Wineries and Vineyards
The IRS recently issued a new Audit Technique Guide (“ATG”, available here) applicable to winery and vineyard operations. As with previous IRS guidance, the new ATG is meant to be used by IRS examiners; however the IRS anticipates the industry will rely upon the publication as a guide. It should be noted, the ATG should not be cited as the IRS's technical position.
Many of the issues in the new publication have been previously covered in prior IRS guidance. In this ATG, however, the IRS appears to streamline many of its positions. For example, the UNICAP rules, to which wineries are subject, have evolved since the 1995 guidance. While previously cited as only temporary, these rules have since been finalized, and additional UNICAP rules have been added.
While the streamlining in the new guidance is mainly procedural, the ATG does reflect some significant developments. One such change is the IRS's acknowledgement that vineyards may qualify for Section 179 deductions. Currently, Section 179 allows a $500,000 deduction to taxpayers who place over $2 million of property in service by the end of 2011. For 2012, Section 179 reduces those numbers to a $125,000 deduction for placing over $500,000 of property in service during that year. The deduction will be further reduced to $25,000 for tax years beyond 2012. The ATG states that, based on changes to the definition of property subject to the Section 179 deduction, "[c]ertain practitioners are taking the position that this new definition includes vineyards and are taking [the Section] 179 deduction."
In addition, the ATG addresses and essentially blesses an income deferral method rejected in a 1996 case. The ATG describes the case as involving an accounting structure in which a farmer, using cash method accounting and operating a vineyard as a division of a winery, would sell grapes to the winery without receiving payment until the wine was sold, up to two or three years later. As a result of using cash method accounting, the vineyard would defer income until such time as the wine was sold. The ATG states that in 1997, the IRS published treasury regulations allowing this accounting practice.
To learn more about the issues discussed above as well as other developments addressed in the ATG, please contact:
Carl Lewis at cslewis@stoel.com
Nikki Dobay at nedobay@stoel.com
Jake Storms at jwstorms@stoel.com
This post was created in conjunction with Nikki Dobay.
Court Upholds San Diego County's Winery Ordinance
On April 15th, a California Superior Court Judge denied a challenge to San Diego County’s new Winery Ordinance. The Ordinance, passed in 2010 and available here, eases restrictions on tasting rooms and sales for smaller producers and allows others to essentially “fast-track” registration as a “small winery” with such designation allowing for pre-approved events, such as weddings.
The challengers claimed that the Ordinance’s Environmental Impact Report (“EIR”) under the California Environmental Quality Act (“CEQA”) was inadequate. Judge Timothy Taylor disagreed, stating “[t]he Board of Supervisors was, by the EIR, adequately informed about the consequences of its decisions. The public (including petitioner) was provided with adequate information regarding the decisions of their elected leaders.”
The challengers have 30 days from the issuance of the ruling to appeal.
Stoel Rives Attorneys Speak at Wine Conference
This past week, Stoel Rives partners Chris Hermann and John McKinsey and associate Jake Storms all participated as panel speakers at the Best Practices for Owning and Operating a Winery conference, held at the Hyatt Vineyard Creek in Santa Rosa, CA. John also acted as co-host of the conference, which covered a wide variety of topics affecting wineries and vineyards, from siting and permitting and valuation to how to build a brand and protect trademarks.
Chris, Chair of Stoel’s Winery and Vineyard Management group, spoke on custom crush agreements and the pitfalls that can affect those who do not adequately protect themselves. John, California Co-Chair of Stoel’s Winery and Vineyard Management group, educated attendees on energy use and utilizing renewable electricity sources. Jake, an associate in the group, spoke on industry trends and California-specific legislative and project actions, including AB 605 and the California High-speed Rail.
The event was well attended, with over 40 stakeholders present at the two-day event. This marks the fifth year of the event, which was sponsored by Stoel Rives and Kennedy/Jenks Consultants, along with industry mainstay, Wines & Vines.
Chris Hermann recipient of Industry Partner award by Oregon Wine Industry
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Stoel Rives partner and wine attorney Chris Hermann was one of two recipients of the Industry Partner award at the 2011 Oregon Wine Industry Symposium in Eugene, Oregon. This award is presented to a vendor or service provider to the industry who, in the course of doing business, has significantly assisted the growth and success of the wine industry and its members. Mark Freund of Silicon Valley Bank was the other award recipient.
TTB Adopts New, Softer Rules for AVAs
The Alcohol and Tobacco Tax and Trade Bureau (TTB) has, in a final rule/treasury decision (available here), issued new and revised regulations with respect to three formerly confusing areas pertaining to American Viticultural Areas (AVAs): brand names that conflict with AVA designations, the AVA application process, and the existence of smaller AVAs inside currently existing or proposed AVAs, aka "nested" AVAs.
The new rules are considered less stringent than were originally proposed by the agency. The originally proposed rules were widely rejected by members of the wine industry and were subject to a resolution of opposition by the California legislature, authored by two lawmakers from the Napa Valley.
Brand Names
The TTB had originally proposed adding a "grandfather" clause for brand names that had received the proper Certification of Label Approval (COLA) but contained the name of a potential or recently established AVA. After receiving comments, the TTB reversed its proposed rules and did not adopt a standard grandfather clause, believing that its current "case-by-case" analysis and flexibility of remedies was preferable.
Establishment of AVAs
The new/revised rule codifies long-standing agency practice and clarifies the process and evidence required in petitioning for a new AVA. The new section 9.12 (27 Code of Federal Regulations, Part 9) sets forth exact requirements, which include very distinct name and boundary evidence, distinguishing features, and detailed maps. The new section 9.13 also spells out in greater detail the actual rule-making process of applying for an AVA. In addition, the TTB stated that while "sufficient viticulture" must exist in order to establish an AVA, it would not establish a rule identifying a minimum acreage site or vineyard density.
"Nested" AVAs
The new Part 9 also directly deals with the issue of smaller AVAs surrounded by larger AVAs or "nested" AVAs. There had been a proposal to prospectively prohibit the creation of "nested" AVAs but the TTB rejected an outright ban and instead set forth regulations regarding evidentiary proof for their establishment. Section 9.12(b) states that when a petitioner is requesting the creation of a smaller AVA within an already existing larger AVA or the creation of a larger AVA that would envelop the smaller AVA, the petitioner must state, in the petition itself, why the proposed AVA is "sufficiently distinct" from the existing one and must explain why the "establishment of the [new] AVA is acceptable."
The TTB also declined to implement standing regulations regarding which AVA a winery in a "nested" AVA could use on its labels, concluding that its current "case-by-case" basis was better than a standing rule.
This post was written in collaboration with Lee Smith, a partner in Stoel’s Sacramento office.
Hermann attends Confrérie des Chevaliers du Tastevin Gathering
The Oregon chapter of the Confrérie des Chevaliers du Tastevin, Sous-Commanderie de Portland held its first event on November 29 at Park Kitchen in downtown Portland. Chapter member Scott
Wright of Scott Paul Wines presented "A Graduate Course: Burgundy 501." We tasted four flights of White and Red Burgundy from Chablis and the Cote d'Or. The presentation was superb and the food and wines presented, as well as the wines brought by the members, were delicious (the '07 Bonneau de Martray Corton Charlemagne was magnificent...thanks Scott!).
It was fun comparing notes on the wines with David Millman of DDO, Shirley Brooks of Elk Cove, Bill and Donna Sweat of Winderlea and Scott Wright of Scott Paul Wines.
I look forward to our next meeting, perhaps with a White Burgundy focus in the Spring.
P.S Thanks very much to David Beck of Crawford Beck Vineyard for the picture.
California High-Speed Rail: Vineyards in California's Central Valley Could be Impacted by its Tracks
A legal update from our colleague Stacy Gillespie.
The California High-Speed Rail Authority (“Authority”) will announce at its December 2, 2010 meeting which segment of the 800-mile HSR will be the first to be built. At its November 4, 2010 meeting, the Authority’s Chief Executive Officer, Roelof van Ark, presented the Authority’s Board members with revised corridor selection criteria for full Board discussion and direction. The Federal Railroad Administration recently sent a letter to the Authority stating that the Stimulus money must all be allocated to the Central Valley. 
Thus, contrary to earlier projections, the two routes in the most populated regions—San Francisco to San Jose, and Los Angeles to Anaheim—are now out of the running. The route that will be the early winner of $4.3 billion in federal and state funds and constructed first will be either Merced to Fresno (60 miles in length), or Fresno to Bakersfield (113 miles in length).
The Authority’s December 2nd determination will be of utmost importance to holders of large property rights, such as wineries, vineyards, and other agricultural interests. All segments of the HSR are undergoing various stages of the environmental review process as required by federal and state environmental laws. During that review, the preferred routes will be determined and alternative routes will be evaluated. Now is the time to get involved and submit comments to the Authority regarding the contemplated routes.
The cities located in the Central Valley corridors include:
1. Sacramento to Merced: Sacramento, Elk Grove, Galt, Lodi, Stockton, Manteca, Ripon, Modesto, Turlock, Livingston, Atwater, andMerced.
2. Merced to Fresno: Merced, Chowchilla, Madera, Clovis, and Fresno.
3. Fresno to Bakersfield: Fresno, Parlier, Reedley, Dinuba, Selma, Visalia, Tulare, Exeter, Porterville, Corcoran, Delano, Wasco, Shafter,and Bakersfield.
Insofar as a particular route for each corridor is determined, inherent in the Authority’s construction of the HSR is its power to acquire rights-of-way of private land—which is certain to require property owners to get quickly up to speed on eminent domain (condemnation) law.
A group of attorneys in our Sacramento office is closely following this issue and specialize in environmental law and eminent domain. Please subscribe if you would like to receive regular email alerts.
Stoel Winery Lawyers Attend Salud!
Last weekend, Stoel winery lawyers attended Salud! and enjoyed visiting with clients and friends at Domaine Drouhin on Friday afternoon and the Governor Hotel on Saturday evening. Proceeds from this year's Oregon Pinot Noir Auction topped $650,000, a reported 7 percent increase from 2009. Donations help support the Salud! mission of providing Oregon's seasonal vineyard works and their families with access to healthcare services.
