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Travelers at the Newark Liberty International Airport may soon be able to imbibe in adult beverages after hours. Legislation expanding the hours the airport is allowed to serve alcohol was unanimously approved by an Assembly panel. Bill A-2419 would allow bars and restaurants operating within an international airport to sell alcoholic beverages between the hours of 8 am and 4 am.

Usually, local municipalities establish by ordinance the hours when alcoholic beverages may be sold for consumption on the premises. Continue Reading Newark Airport Bars May Soon Be Open After Hours

Attorney General Christopher S. Porrino and the Division of Alcoholic Beverage Control announced a settlement with a Hunterdon county craft beer wholesaler, resulting in a record $2 million fine for alleged trade practice violations.

The Division alleged that Hunterdon Brewing Company LLC sold draft beer tap systems below fair market prices and mislabeled the charges as “miscellaneous” on invoices to conceal them. The Division alleged that the company also ignored credit regulations for at least 700 retail customers. In addition to reviewing thousands of documents, the Division compiled sworn statements from more than two dozen retail licensees.

Continue Reading Craft Beer Wholesaler to Pay $2 M Fine to Settle Trade Practice Violations

Legislation geared towards establishing a loan program for vineyard and winery capital expenses was released by the Assembly Commerce and Economic Development last month. The bill (A-4274) would direct the New Jersey Economic Development Authority (“EDA”), in consultation with the Department of Agriculture (“Department”), to create a loan program and application process for the purpose of supplying loans to certain eligible vineyards or wineries to pay for qualified capital expenses.

Continue Reading Legislation to Expand Lending for NJ Vineyards and Wineries

In a recent New Jersey Tax Court decision, ACP Partnership v. Garwood Borough, the court ruled that it will permit consideration of a property’s environmental contamination in deciding its true market value even though the property possesses a “value in use” to the tax payer. The case is significant because it rebuts the notion that a commercial property “in use” by the tax payer may only be assessed using “normal assessment techniques,” with no consideration given to environmental contamination in establishing its true market value. The subject property in ACP Partnership is a multi-tenanted and multi-structured industrial and warehouse complex containing approximately 230,000 square feet of improvements. The tax payer leases the property to tenants for warehouse and industrial uses. The tax payer also occupies a small portion of the property for self-storage. Continue Reading Court May Consider Environmental Contamination of Property in Assessing True Market Value Even When Property Generates Income and is Used by Tax Payer

During the last week of October, the liquidating trustee of the Radio Shack liquidating trust filed lawsuits in the United States Bankruptcy Court for the District of Delaware. The lawsuits were seeking to avoid “preferential” payments made by Radio Shack to its creditors within 90 days of the filing of its bankruptcy petition (the “Preference Period”), which took place on February 15, 2015.

There were approximately 200 creditors sued for allegedly being “preferred” by Radio Shack, including commercial landlords, utility providers, banks, logistics companies and providers of electronic goods, among other trade creditors. It is important that the creditors receiving these complaints understand that there are defenses to these actions.

One of the strongest defenses for a creditor being sued is the ordinary course of business defense. To prove this defense, evidence of business custom and practice is considered. Under 11 U.S.C. 547(c)(2), the obligation being paid must be incurred in the ordinary course of business or financial affairs of the debtor, and the payment must have been made in the ordinary course of business of both the debtor and creditor (subjective test) or the payment was made under “ordinary business terms” (objective test). Thus, there are two standards that can be proved by a creditor to successfully defend a preference action under this defense. Providing either one will allow the creditor to prevail in its defense. Continue Reading Radio Shack Preference Lawsuit – Ordinary Course Defense

In a recent New Jersey Tax Court decision, Methode Electronics, Inc. v. Twp. Of Willingboro, the court ruled that the assessment of a contaminated piece of property, which was not developable and could not be developed in the foreseeable future, should be reduced to a nominal valuation.

Methode involved an industrial property where printed circuit boards and airbag components were manufactured for nearly twenty years. As a result of this activity, the property became contaminated with volatile organic compounds and metals. The property owner ceased operations in 1999 and no other businesses have operated at the property since that time. The building was demolished, except for a concrete slab that served as the floor for the facility. The slab was left in place to prevent the off-gassing of toxic vapors from soil and groundwater.

Continue Reading Tax Liability of Environmentally Contaminated Industrial Property – 2015 Update

Since New Jersey’s Craft Distillery Law went into effect on December 1, 2013, several craft distilleries have opened in the State of New Jersey. This is the focus of a recent New York Times article, which details the stories behind three distilleries that have opened in New Jersey recently. Some of the most attractive features of the new law are:

  1. It significantly reduces in state license costs through the Division of Alcoholic Beverage Control (“ABC”);
  2. It provides businesses the ability to conduct onsite tours and sampling; and,
  3. It provides distillers the ability to sell distilled spirits at retail to customers visiting the premises.

In view of these key features and the trend towards nationwide wide growth in the craft distillery industry, growth in New Jersey should continue prosper and flourish.

Stark & Stark’s Beer & Spirits Group provides sound legal counsel to the craft beer and distillery industry in New Jersey and Pennsylvania. For more information contact Marshall Kizner, co-chair of the Beer & Spirits group, at (609) 219-7449 or mkizner@stark-stark.com.

If you are considering venturing into the distillery business, in New Jersey, Pennsylvania, or any other state, it is important to know what the Federal Government’s rules, regulated through the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), provide for the location, use of plants and production of distilled spirits.  The following article highlight’s the TTB’s rules and regulations:

1.)   Home Production Barred. To start, producing distilled spirits is not something that can take place in someone’s basement. A person may not produce distilled spirits at home for personal use. Distilled spirits must be produced by a business registered with the TTB and a plant approved by the TTB.

2.)   Location of Plant. The following locations are expressly prohibited: 

  • Any residence, shed, yard, or enclosure connected to a residence;
  • A vessel or boat;
  • A place where beer or wine is produced;
  • A location where liquors are sold at retail; or
  • A place where any other business is conducted, subject to certain exceptions.

3.)   Premises Should be Adjoined. Generally, the premises of a plan must be continuous, i.e., located in the same vicinity. However, the TTB may approve the registration of the plant where there are separations of the premises if there is no jeopardy to revenue caused by the separation of premises and separation does not create administrative problems for the TTB.

4.)   Use of Plant Premises. The plant must be authorized through the filing of a notice of registration or as otherwise approved by the TTB. The premises must also be used for storage of the distilled spirits, unless the TTB approves another method of storage.

5.)   Other Business Use on Premises. The premises may only be used to conduct another business operation if the TTB authorizes the conduct. The person seeking permission to use the premises for something other than distilling spirits must apply pursuant to TTB regulations and receive approval.

6.)   Alternative Storage. The TTB requires the filing of an application for registration if a distillery needs to utilize a warehouse for storage. After submitting the appropriate application, the TTD may approve registration if the proposed location will not jeopardize revenue and there is evidence sufficient to establish the need for the warehouse.  The TTB may impose special use restrictions on the warehouse as a precondition to storing distilled spirits.

These restrictions only include the Federal Government’s limitations on the production, location and use of plants for the production of distilled spirits. Significantly, there are various state law, local law and practical considerations that also impact the potential locations. Due to the complexity of these issues, counsel should be consulted before finalizing a location for the production of distilled spirits.

In an effort to level the playing field with winemakers and craft brewers, new legislation was proposed in the House of Representatives on February 25, 2014 that would greatly reduce the federal excise tax rate on craft distillers. Congressman Chris Gibson filed the bill. HR 4083, which is named the “Distillery Excise Tax Reform Act of 2014”.

Under the bill the excise tax rate of $13.50 per proof gallon would be reduced to $2.70 for the first 100,000 proof gallons produced annually. After 100,000 proof gallons are produced in a year, the rate for subsequent production would increase to $13.50.

Passage of this legislation should help spur economic growth for craft distillers. With additional money available, distillers will be able to expand operations, invest in development of their product, improve their premises and hire additional workers. Furthermore, passage of the legislation should promote additional individuals and companies to begin craft distillery production.

The Distillery Excise Tax Reform Act of 2014’s progress can be monitored at the govtrac.us website. For more information on Stark & Stark’s Beer & Spirits group, please click here.

Two new types of licenses for wineries and breweries in New Jersey have been introduced in the state assembly. The details of the proposed legislation are highlighted, below.

Farm Brewery License

The proposed legislation would create a “farm brewery license” allowing a licensee to brew up to 2,000 barrels of malt alcoholic beverages a year for retail sale for consumption off premises and to offer samples on the premises.  Issuance of the license requires that the brewery be located and constructed upon a tract of land exclusively under the control of the license holder; that the licensee be actively engaged in farming on or adjacent to the brewery premises; and that the license holder is growing or cultivating hops or another product used in the production of the malt alcoholic beverage. The cost of the license varies based upon the quantity of malt alcohol that the holder manufactures. The cost range for the license is between $100 to $300.

Winery-Brewery Sublicense 

The proposed legislation also institutes a “winery-brewery sublicense” that would permit wineries to produce up to 3,000 barrels of malt alcoholic beverages for retail sale to consumers for consumption off the licensed premises and to offer samples on the premises. To receive this sublicense, the licensee must be the holder of a plenary winery license or farm winery license; the licensee must be engaged in farming on or adjacent to the winery premises; and must be growing and cultivating hops or another product used in the production of malt alcoholic beverage. The fee for the sublicense is $750.

The full language of the proposed legislation can be viewed here. For more information on Stark & Stark’s Beer & Spirits group, please click here.