Administrative Rules of the State of Montana

BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

In the matter of the adoption of New Rule I and II and amendment of ARM 42.12.101, 42.12.106, 42.12.110, 42.12.111, 42.12.115, 42.12.122, 42.12.128, 42.12.130, 42.12.133, 42.12.141, and 42.12.143 relating to liquor license applications

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NOTICE OF PUBLIC HEARING ON PROPOSED ADOPTION AND AMENDMENT

TO: All Concerned Persons

1. On June 2, 2010, at 1:00 p.m. a public hearing will be held in the Third Floor Reception Area Conference Room of the Sam W. Mitchell Building, at Helena, Montana, to consider the adoption and amendment of the above-stated rules.

Individuals planning to attend the hearing shall enter the building through the east doors of the Sam W. Mitchell Building, 125 North Roberts, Helena, Montana.

2. The Department of Revenue will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice. If you require an accommodation, contact the Department of Revenue no later than 5:00 p.m., May 24, 2010, to advise us of the nature of the accommodation that you need. Please contact Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-4375; or e-mail canderson@mt.gov.

3. The proposed new rules do not replace or modify any section currently found in the Administrative Rules of Montana. The proposed new rules provide as follows:

NEW RULE I ON-PREMISES LICENSE SALES FOR OFF-PREMISES CONSUMPTION (1) An on-premises consumption retail licensee authorized to sell alcoholic beverages for off-premises consumption may sell alcoholic beverages for off-premises consumption only in their original packages or as an individual serving for off-premises consumption.

AUTH: 16-1-303, MCA

IMP: 16-1-302, 16-4-105, MCA

REASONABLE NECESSITY: The department is proposing to adopt New Rule I to improve the understanding of liquor laws by liquor licensees and the public regarding what alcoholic beverages can be sold by on-premises consumption licensees for off-premises consumption to eliminate confusion. Alcoholic beverages must be sold in their original packages or in a limited single service size of 16 ounces or less. Beer containers known as "growlers" or large containers containing mixed beverages are not the original packaging and are not allowed to be sold for off-premises consumption by on-premises consumption retail licensees. It should be noted this does not apply to brewers, as the manufacturer of the product they may sell for off-premises in any container. The department receives frequent questions regarding what is allowed to be sold for off-premises consumption by an on-premises licensee. This proposed rule is consistent with the response the department has provided to those questions.

NEW RULE II SACRAMENTAL WINE LICENSE (1) An establishment in Montana desiring to sell sacramental wine pursuant to 16-4-115, MCA, may apply to the department by submitting an off-premises wine license application accompanied by a $200 fee, of which $100 is a processing fee and $100 is an annual license fee.

(2) An applicant must qualify for licensure under 16-4-401, MCA.

(3) The premises must meet suitability requirements for the retail sale of wine for off-premises consumption excluding the requirements to operate as a bona fide grocery store or pharmacy.

(4) This type of license is nontransferrable and not subject to the quota system as described in 16-4-105, MCA.

(5) Sacramental wine containing not more than 16% alcohol by volume must be purchased by a sacramental wine licensee from a Montana wine distributor, winery, or agency liquor store licensed in Montana; sacramental wine that is more than 16% alcohol by volume must be purchased by a sacramental wine licensee from an agency liquor store.

(6) Licensees must adhere to all laws and rules relating to the retail sale of off-premises consumption wine.

AUTH: 16-1-303, MCA

IMP: 16-4-105, 16-4-316, 16-4-401, 16-5-501, MCA

REASONABLE NECESSITY: The department is proposing to adopt New Rule II to reflect the statutory changes made by the 2009 Legislature with Senate Bill 511. Senate Bill 511 established a sacramental wine license for the retail sale of sacramental wine for religious purposes. Establishments located in Montana wishing to sell sacramental wine only, now have the ability to apply for an off-premises consumption sacramental license.

4. The rules proposed to be amended provide as follows, stricken matter interlined, new matter underlined:

42.12.101 APPLICATION FOR LICENSE (1) remains the same.

(2) Applications for licenses shall be in the names of all persons with an ownership interest or to have an ownership interest in the business to be operated under the license. An owner of 10% or more or to who will have an ownership interest of 10% or more in ~~the business to be operated under~~ the license must meet the requirements as described in 16-4-401, MCA. If no single owner's interest is more than 10%, then persons whose combined ownership totals or will total 51% must meet the requirements as described in 16-4-401, MCA. The names of all such persons shall appear on the licenses. The disqualification of any one or more applicants to hold the license disqualifies all.

(3) In addition to other information required on the application form, the department may require an applicant to submit all information necessary to determine qualifications, including, but not limited to, personal history statements and ~~authorization to access~~ state and federal income tax information for all persons who appear to have an ownership interest or control over the business operated or to be operated under the license; and, in the case of a license to be operated seasonally, the applicant may be required to submit sufficient information for the department to determine whether the criteria for seasonal operation as described in 16-3-310, MCA, and ARM 42.13.108 are met.

(4) Upon receipt of an application for a license to sell, manufacture, or distribute alcoholic beverages, the department shall make a thorough investigation as to the qualifications of the applicant and the suitability of the premises proposed for licensing. If, upon such investigation, it appears that the applicant is qualified under the law, and the premises is suitable for licensing under the laws of the state and the rules of the department, the department shall issue the license if all other requirements of the law and these rules are fulfilled.

(5) through (8) remain the same.

(9) The provisions of this rule do not apply to:

(a) the transfer of a security interest in a licensed liquor operation; or

(b) a transfer that would not result in a new owner or owner of less than 10% in the ~~licensed corporation,~~ license owning 10% or more of the same ~~licensed corporation~~ license. These transfers may occur without prior consent of the department. ~~Immediate~~ Written notice must be given to the department within 30 days in these cases in accordance with ARM 42.12.103; or

(10) through (12) remain the same.

AUTH: 16-1-303, MCA

IMP: 16-4-105, 16-4-201, 16-4-204, 16-4-207, 16-4-210, ~~16-4-220,~~ 16-4-401, 16-4-402, 16-4-414, 16-4-502, MCA

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.101 to reflect the statutory amendments made by the 2007 Legislature with House Bill 113 to 16-4-401, MCA. Section 16-4-101, MCA, requires anyone with ownership interest in an alcohol beverage license of 10% or more to apply and qualify for a liquor license. The department is also proposing amendments to (3) to eliminate confusion and to ensure consistent treatment of liquor licensees in the application of liquor laws in regards to "seasonal" status. Section 16-3-310, MCA, and ARM 42.13.108 establish criteria for the granting of seasonal status, and the additional information submitted with the application will enable the department to determine whether such criteria are met. The department is further amending the rule to enhance liquor licensees' understanding that the provisions of this rule do not apply when there is a death of the licensee, and written notice of a transfer must be given within 30 days.

42.12.106 DEFINITIONS The following definitions apply to this ~~sub~~chapter:

(1) through (9) remain the same.

(10) "An individual serving" means a drink that is 16 ounces or less.

(11) "Licensee" means a person, partnership, association, or corporation holding a Montana retail liquor license, a ~~and~~ retail liquor operations located on an U.S. military installations, an alcoholic beverage manufacturer, a table wine distributor, or a beer wholesaler within Montana.

(11) and (12) remain the same but are renumbered (12) and (13).

~~(13)~~(14) "Noninstitutional lender" means a person who loans money to the applicant for a license or to the licensee other than a state or federally regulated banking or financial institution ~~who loans money to an applicant for a license or to a licensee~~, a credit union, an investment company, or a development company as authorized under Title 32 MCA.

(14) and (15) remain the same but are renumbered (15) and (16).

(17) "Patio/Deck" means a specific area designated on a floor plan which shall be completely enclosed by at least a three-foot fence or wall, immediately adjacent to and accessible from inside the licensed premises.

(16) and (17) remain the same but are renumbered (18) and (19).

(20) "Retail Alcohol Beverages license" means a license operated by an establishment for the retail sale of alcoholic beverage for either on- or off-premises consumption but does not include brewery, winery, or distillery licenses.

~~(18)~~(21) "Restaurant," as it applies to an all-beverage license or a retail on-premises beer license, means a public eating establishment allowing for seated service for a minimum of 12 persons at tables or booths where the sale of food served is prepared on-site.

(22) "Sacramental wine" means wine that is manufactured and sold exclusively for use as sacramental wine or for other religious purposes.

(19) remains the same but is renumbered (23).

(24) "Special event," as it relates to all special permits and catering, means a short, infrequent, out-of-the-ordinary occurrence such as a picnic, festival, reception, or sporting contest for which there is an outcome, conclusion, or result. For the purposes of this rule, a fair is considered a special event if it is a county, state, or regional fair that occurs no more than once per year, is held on a publicly-owned fairgrounds, and is officially sanctioned by a government entity.

(20) through (22) remain the same but are renumbered (25) through (27).

AUTH: 16-1-303, MCA

IMP: 16-1-106, 16-3-311, 16-4-105, 16-4-205, 16-4-207, 16-4-301, 16-4-401, 16-4-402, 16-4-404, 16-4-413, 16-4-420, 16-4-423, MCA

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.106 to include definitions of terms that are used in other rules contained in Chapter 12, subchapter 1 and to enhance the definition in existing terms for further understanding.

42.12.110 SERVICE OF NOTICES (1) A notice of proposed adverse action issued pursuant to 16-4-406, or 16-4-407, MCA, shall be served upon the licensee of record or, in the case of an application for a new license, on the applicant or, in the case of an application for a new license, on the applicant by sending a copy of the notice to the licensee or applicant by certified mail to the mailing address on file with the department.

(2) remains the same.

(3) The licensee or applicant must respond to the department in writing within 20 days of service of the notice of proposed adverse action. Failure to respond will result in the enforcement of the proposed administrative action in the notice.

AUTH: 16-1-303, MCA

IMP: 16-4-404.htm" target="MCA">16-4-406, MCA

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.110 to enhance liquor licensees' understanding and eliminate any confusion of the department's business practice on the time allowed by a licensee to respond to a proposed adverse action notice. Licensees have 20 days to respond to a proposed adverse action.

42.12.111 PROCESSING FEES (1) The following are the fees to be charged for processing endorsement and license applications:

(a) All-beverages license (including veterans' or fraternal)............................. $200

(b) Catering endorsement (all-beverages, restaurant

beer/ and wine, beer and wine........................................................................................ $100

endorsement (when applied for concurrently)................................................................ $200

(d) Retail on-premises beer license (including

veterans' or fraternal)........................................................................................................ $200

(e) Wine amendment (for use with existing

on-premises retail beer license)..................................................................................... $100

(f) Restaurant beer and /wine license................................................................ $200

(g) Retail on-premises beer license

and wine amendment (when applied for concurrently).................................................. $200

(h) Retail off-premises beer license................................................................... $100

(i) Retail off-premises table wine license.......................................................... $100

(j) Retail off-premises beer and table wine license

(when applied for concurrently)........................................................................................ $100

(k) W~~holesale beer~~ Beer wholesaler license.................................................... $100

(l) ~~Wholesale beer~~ Beer wholesaler sub-warehouse license.......................... $100

(m) ~~Wholesale table~~ Table wine distributor license......................................... $100

(n) ~~Wholesale table~~ Table wine distributor sub-warehouse............................ $100

(o) ~~Wholesale beer~~ Beer Wholesaler and table wine distributor license....... $100

(p) Brewer's license............................................................................................. $100

(q) Beer importer's license................................................................................. $100

(r) Resort all-beverages license......................................................................... $200

(s) Winery~~/wine importer~~ license........................................................................ $100

(t) Sacramental wine license.... ………………………………………………..$100

(u) Domestic distillery license............................................................................. $100

(2) through (5) remain the same.

AUTH: 16-1-303, MCA;

IMP: 16-1-302, 16-1-303, 16-4-414, 16-4-420, MCA;

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.111 to include all types of licenses in the processing fee schedule to match current department practice and reflect the statutory changes made by the 2009 Legislature with Senate Bill 511 creating a sacramental wine license. In addition the proposed rule changes the license types to reflect the statutory language for Restaurant Beer and Wine License and Beer Wholesaler License.

42.12.115 ASSESSMENT OF LICENSE RENEWAL LATE-PAYMENT ~~PENALTY~~ FEE - GROUNDS FOR WAIVER (1) The department will assess a license renewal late-payment ~~penalty~~ fee in all cases where a licensee fails to pay the license renewal fee on or before the due date. The renewal application and fee is timely filed and paid if mailed in an envelope postmarked by the United States Postal Service ~~prior to~~ on or before the due date. If the due date falls on a Saturday, Sunday, or state legal holiday, a postmark for the following business day or a payment received at the department on the following business day is timely.

(2) The department may waive a license renewal late-payment ~~penalty~~ fee assessment upon receipt of a written request by the licensee. The request must state the reason for late payment and be supported by documentation. A waiver of the license renewal late-payment ~~penalty~~ fee assessment shall be granted under the following conditions:

(a) a department error;

(b) the department mailed a license renewal notice less than two weeks prior to the due date;

(d) a United States Postal Service error;

(e) a renewal application and fee was erroneously mailed to the Internal Revenue Service or ~~bureau of alcohol, tobacco, and firearms~~ Alcohol and Tobacco Tax and Trade Bureau;

(f) a delay in payment due to bankruptcy or foreclosure action; or

(g) the late payment is the only late payment within the most recent five consecutive years or since the license was acquired, whichever is less, and payment was received at the department within 30 days after the due date.

(3) A licensee's neglect, lack of funds, or ignorance of the law are not sufficient reasons for waiver of a license renewal late-payment ~~penalty~~ fee assessment.

AUTH: 16-1-303, MCA

IMP: 16-4-501, MCA

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.115 to reflect the same statutory language found in 16-4-501, MCA, regarding late-payment fees and to clean up inconsistencies. The rule changes the wording from late-payment penalty to late-payment fee. In addition, the proposed rule adds consistency with the timing of payment, on or before the due date. Subsection (e) was amended to mirror the title of the U.S. Department of Treasury, Alcohol and Tobacco Tax and Trade Bureau.

42.12.122 DETERMINATION OF SUITABILITY OF PREMISES (1) remains the same.

(2) The premises ~~must~~ may be considered suitable for the retail sale of alcoholic beverages only if:

(a) it meets the standards of the ~~DPHHS~~ Department of Public Health and Human Services; the dDepartment of lLabor and iIndustry, bBuilding cCodes bBureau; and the sState fFire mMarshal's oOffice in the fFire pPrevention and iInvestigation bBureau of the dDepartment of jJustice; or their delegated representatives;:

(i) a license issued for off-premises consumption of beer and/or table wine must meet the standards for an establishment operated as a grocery store, or a drug store licensed as a pharmacy;

(ii) a license issued for on-premises consumption of beer must meet the standards for an establishment operated as a bar or tavern;

(iii) a license issued for on-premises consumption of beer and wine must meet the standards for an establishment operated as either a restaurant or a prepared food business, and must meet the requirements for a bar or tavern;

(iv) a license issued for on-premises consumption of all-alcoholic beverages must meet the requirements for a bar or tavern.

(b) the investigator can easily ~~ascertain~~ determine the type of alcoholic beverages business that is being conducted on the premises due to indoor and outdoor advertising, signage, and/or the general layout and atmosphere of the premises to be licensed. The ~~two~~ circumstances to be ~~ascertained~~ determined are:

(i) a beer and/or table wine license issued for off-premises consumption operates at a premises recognizable as a grocery store or a as a drugstore licensed as a pharmacy as defined in ARM 42.12.126;

(ii) a license issued for on-premises consumption, operates at a premises recognizable as restaurant, bar, tavern, or other business directly related to the on-premises consumption of alcoholic beverages, such as a bowling alley, hotel, or gambling casino. ~~The licensed premises must have a bar preparation area and sufficient seating to encourage patrons to remain on the premises and consume the alcoholic beverages sold by the drink.~~ ~~Sufficient seating must consist of not less than 12 seats at either a bar, not including a service bar as defined in ARM~~ 42.12.401~~, or tables, booths, gaming areas, or any combination of the above; and~~ with the exception of a restaurant beer and wine license, must comply with the following requirements:

(A) Must be operated at a premises clearly recognizable as a business established for the on-premises consumption of alcoholic beverages;

(B) The premises must include sufficient seating, consisting of not less than 12 seats with at least six seats at a bar and the other six seats at a bar, tables, booths, gaming areas, or any combination of the above. Seats at gaming machines are not included in the 12 seats required;

(C) For a beer only license, the premises must meet the standards for an establishment operated as a bar or tavern with designated space and accommodation for the individual sale and consumption of beer;

(D) For a beer and wine license, the premises must meet the standards for an establishment operated as either a restaurant or a prepared food business (not including a coffee shop or bakery); as an establishment with designated space and accommodations where, in consideration of payment, food is routinely furnished to the public; and must meet the requirements for a bar or tavern with designated space and accommodations for the individual sale and consumption of beer and wine;

(E) For a license issued for on-premises consumption of all-alcoholic beverages, the premises must meet the requirements for a bar; a tavern with designated space and accommodation for the individual sale and consumption of beer, wine, and distilled spirits; or a restaurant (not including a coffee shop or bakery) with designated space and accommodations where, in consideration of payment, food is routinely furnished to the public. The bar, tavern, or restaurant must offer individual sales of beer, wine, and distilled spirits by the drink;

(F) The licensee or employees must have direct involvement in the service of alcohol including, but not limited to, no alcoholic beverages can be provided to the customer through automatic dispensing or vending machines, self-service reach-in coolers, self-service opening shelving, or a self-service beer tap;

(G) The on-premises operation is physically separated from other businesses operated in the same building that are unrelated to the business of retail on-premises alcoholic beverages consumption, such as a grocery store, off-premise alcoholic beverage business, laundromat, clothing store, hardware store, flower shop, nursery, or preschool;

(H) Premises approved by the department prior to the 2010 effective date of this rule are subject to the conditions of the rule which were in effect at the time of approval. Any alteration is subject to the above premises requirements; and

(iii) a restaurant beer and wine licensed premises must have a service bar as defined in ARM 42.12.401, meet the requirements of (2)(b)(ii)(F) and (G), and sufficient seating as defined in 16-4-420, MCA;

(d) the premises is open for business on a regular basis so as not to be considered a license on nonuse status;

(e) any premises to be used for the on-premises consumption of alcoholic beverages may include a deck or patio, as long as the deck or patio is enclosed by at least a three-foot fence or wall immediately adjacent to and accessible from the inside licensed premises. The deck's or patio's exits shall be in compliance with fire regulations;

~~(e)~~(f) the layout of the premises allows for licensee- and/or employee-only control over the preparation, sale, service, and distribution of alcoholic beverages;

~~(f)~~(g) the investigator can verify to the department that the dimensions shown on the floor plan accurately represent the physical layout of the premises;

~~(g)~~(h) the applicant has demonstrated that adequate safeguards are in place to prevent the sale of alcoholic beverages to minors and intoxicated persons;

~~(h)~~(i) the premises to be used for the on-premises consumption of alcoholic beverages is physically separated from any business not directly related to the on-premises consumption of alcoholic beverages by four permanent walls. The walls must be floor to ceiling and shall not be moved without department approval of alterations to the premises pursuant to ARM 42.13.106. The premises can maintain inside access to each business conducted in the building through a doorway no larger than six feet wide with a door that can be closed and locked when not in use. Businesses directly related to the on-premises consumption of alcoholic beverages are a hotel, bowling alley, gambling casino, or restaurant; and

~~(i)~~(j) the provisions of (3) are not violated.

(3) In addition to the other requirements in this rule, the case of any license operated under a concession agreement, the premises can only be considered suitable for the retail sale of alcoholic beverages if the existence of a concession agreement and the names of the parties to the concession agreement are plainly disclosed to the public both inside and outside of the licensed premises by signage as follows:

(a) at least one sign inside the licensed premises, measuring not less than 8½ by 11 inches and with printing in a font size not smaller than 72, must be clearly visible to customers, and must plainly disclose:

(i) the existence of a concession agreement;

(ii) the names of the persons or entities which are party to the concession agreement and the assumed business names as filed with Secretary of State's Office, including which party is the licensee; and

(iii) the fact that the licensee is responsible for the service of alcoholic beverages within the premises; and

(b) at least one sign outside the license premises so the public can easily determine that alcoholic beverages are available.

(c) The requirements of (3)(a) and (b) regarding signage must be met for all licenses operating under a concession agreement and effective for any such license to be issued or renewed for the license year beginning July 1, 2011 or thereafter.

~~(3)~~(4) The premises cannot be considered suitable for the retail sale of alcoholic beverages if:

(a) local government zoning restrictions or ordinances prohibit the sale and/or consumption of alcohol at the location of the premises;

(b) the location is off regular police beats and cannot be properly policed by local authorities; and

~~(i) alcoholic beverages being provided the customer through automatic dispensing or vending machines, or~~

~~(ii)~~ ~~self-service beer tap;~~

~~(d)~~ the on-premises operation is not physically separated from other businesses operated in the same building that are unrelated to the business of retail on-premises alcoholic beverages consumption, such as a grocery store, laundromat, clothing store, hardware store, flower shop, nursery, or preschool; and

~~(e)~~ the operator of the alcoholic beverages business intends to conduct some or all of the sale of alcoholic beverages through the use of a drive-up window.

(4) remains the same but is renumbered (5).

AUTH: 16-1-303, MCA

IMP: 16-3-311, 16-4-402, 16-4-404, 16-4-405, 16-4-420, MCA

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.122(2)(b)(ii) to ensure the understanding by applicants, licensees and the public of the suitability requirements for a premises to be licensed and where alcoholic beverages may be served for on-premises consumption to eliminate any confusion. On-premises liquor licenses are made available for the benefit of the public and to provide the alcohol available by the drink to the public. The department is also proposing to add (2)(e) and (3) to protect the public health and safety in the administration of liquor laws by adding language regarding a deck or patio and by notifying the public that alcoholic beverages are available on the premises and the licensee and concessionaire who are responsible for the service. The department has received complaints that there is not proper notice of who is operating the license and with the addition of (3) it provides transparency to the public and proper notice for the public's right to know.

The changes to the premises are for future applicants and do not apply to licensed premises already licensed.

42.12.128 CATERING ENDORSEMENT (1) and (2) remain the same.

(3) A catered event may only last for a maximum of three days, except that each licensee may have one special event per year that lasts up to seven days for a fair. A fair means a county, state, or regional fair that occurs no more than once per year, is held on a publicly-owned fairgrounds, and is officially sanctioned by a government entity.

(4) Licensees granted approval to cater such special events are subject to the provisions of 16-3-306, 16-4-111, and 16-4-204, MCA, and ARM 42.13.101.

~~(4)~~(5) Every licensee holding a catering endorsement shall report, on or before the 15th day of each month, those events the licensee catered in the previous month. The report shall include the date, time, the sponsor of the event, and place of the catered event. This report can be provided to the department in letter format.

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-3-103, 16-4-111, 16-4-204, MCA

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.128 to ensure consistent and equitable treatment in the application of liquor control laws by further outlining how a catering endorsement is to be used and the length of time an event can be catered. In addition, the department is requesting the sponsor of the event to be included in the monthly report for transparency purposes.

42.12.130 DETERMINATION OF LICENSE QUOTA AREAS (1) Any applicant applying to the department for a new license or transfer of location of an existing license under the quota limitations provided for under 16-4-105, ~~and~~ 16-4-201, and 16-4-420, MCA, must submit to the department a sworn statement or affidavit from the local county or city surveyor, or a private licensed land surveyor ~~or local government official~~ attesting to the location of the proposed premises.

(2) If the location of the proposed premises is not within the boundaries of an incorporated city, the ~~official~~ surveyor must attest to the exact distance from the nearest corporate boundary to the proposed premises as measured from official city or county plats.

(a) The distance must be measured by radial survey method from the nearest corporate city boundary to the nearest entrance of the proposed premises.

(3) through (3)(d) remain the same.

AUTH: 16-1-303, MCA

IMP: 16-4-105, 16-4-201, 16-4-409, 16-4-420, 16-4-501, MCA

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.130 to ensure consistent and equitable treatment of liquor licensees in the application of liquor control laws. The department is removing local government officials from attesting to the location of the licensed premises. The department requires a qualified surveyor to determine the exact location of a premises proposed for licensing and requires both a legal description and street address of the proposed premises.

42.12.133 CONCESSION AGREEMENTS (1) All new concession agreements must be submitted to the department for review and approval prior to their execution and/or effective date, and must set forth the following:

(a) the nature of the agreement is one that arises from a mutually beneficial situation only;

(b) the agreement gives the licensee possessory interest in the concessioned premises;

(d) the licensee is responsible for the sales and service of all alcoholic beverages;

(e) the parties may share the employees. In the event of shared employees, the licensee must retain the right to discipline or otherwise sanction any employee in relation to the service of alcohol. Any violation of liquor law is the sole responsibility of the licensee;

(f) the compensation to be paid for shared employees. The compensation may not be based on a percentage of alcohol sales;

(g) the nonlicensed entity cannot order, or otherwise purchase, any alcoholic beverage product from a wholesaler or agency liquor store;

~~(g)~~(h) the agreement must include language that allows the licensee to terminate the agreement without cause; ~~and~~

~~(h)~~(i) that all the proceeds from the sale of alcoholic beverages are the property of the licensee.; and

(j) meet the suitability rule requirements for concession agreements in ARM 42.12.122.

(2) The department, upon receipt of the concession agreement and any supporting documentation, will advise the licensee within seven working days of approval or denial of the agreement unless further documentation or an audit review is necessary. Upon approval of the agreement, the license will reflect language that the licensee is also serving alcoholic beverages in the establishment.

(3) remains the same.

AUTH: 16-1-303, MCA

IMP: 16-3-305, 16-3-311, 16-4-401, 16-4-402, MCA

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.133 to require concession agreements to include that compensation be paid for shared employees. The proposed rule notifies licensee and concessionaries that compensation may not be based on a percentage of alcohol sales. Concession agreements are agreements under which an all-beverage liquor or an on-premises consumption beer licensee uses their license in an otherwise nonlicensed establishment within the confines of their current building. For example, in the case of Chili's and Macaroni Grill in Helena - where Chili's owns the license and has a concession agreement with Macaroni Grill to serve alcoholic beverages. Subsection (1)(j) is added to enhance liquor licensee understanding of the signage requirements in the suitability of premises rule 42.12.122. Section (2) is amended because in some cases it is necessary to ask for further documentation when the agreement is not complete or an audit review is conducted by the Department of Justice, which may extend beyond the seven working days.

42.12.141 ~~CORPORATE LICENSES~~ LICENSED ENTITIES (1) No alcoholic beverages license shall be issued to ~~a Montana corporation~~ an entity unless the following requirements are met:

(a) ~~The corporation was organized and has existed as a Montana corporation or~~ the entity has been authorized to do business in Montana prior to making application for an alcoholic beverages license; ~~and~~

(b) ~~corporate~~ the application must be accompanied by a copy of the ~~corporation's~~ entity's ~~certificate of incorporation or certificate of good standing~~ Certificate of Existence for Corporations and LLCs or a copy of the entity's Certificate of Fact for all other types of entities issued within the last six months by the Montana Secretary of State; and

(c) the applicant must be current on all filings and payments related to Montana income, corporation, withholding, business, and other taxes.

AUTH: 16-1-303, MCA

IMP: 16-4-401, MCA

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.141 to reflect the statutory amendments made with House Bill 113 in the 2007 Legislature to 16-4-401, MCA. Section 16-4-401, MCA, allows out-of-state residents to apply for liquor licenses and refers to the term "an entity" versus "corporations" to reflect all types of common businesses. The rule amendment changes "Montana corporation" and replaces it with "an entity". In addition, the department is proposing to amend to include a requirement for applicants to be current on all income, corporation, withholding, and business taxes and filings to reflect the department's current policy when processing licensing applications to improve applicant's ease and convenience in meeting their responsibilities under the law.

42.12.143 RESTRICTION ON INTEREST IN OTHER LICENSES (1) Except as provided in 16-4-205, MCA, any person ~~owning stock in a corporation which owns~~ holding an ownership interest in an all-beverages license issued pursuant to 16-4-401, MCA, is not qualified to own an interest~~, either as owner, partner, or stockholder,~~ in:

(a) another all-beverages license in Montana,;

(b) ~~wholesale beer~~ a Montana beer wholesaler license~~, or~~;

(d) an alcoholic beverage manufacturer; or

(e) an importer of alcoholic beverages.

(2) Any person holding ownership interest in a Montana retail alcoholic beverages license is not qualified to own an interest in:

(a) a Montana beer wholesaler license;

(b) a Montana table wine distributor license;

(d) an importer of alcoholic beverages.

~~(2)~~(3) Any person ~~owning stock in a corporation which owns~~ holding an ownership interest in a ~~wholesale~~ beer wholesaler license issued pursuant to 16-4-401, MCA is not qualified to own an interest~~, either as owner, partner, or stockholder~~ in:

(a) another ~~wholesale beer~~ Montana beer wholesaler license;

(b) an alcoholic beverage manufacturer;

(d) Montana retail alcoholic beverages license.

~~(3)~~(4) Any person ~~owning stock in a corporation which owns~~ holding an ownership interest in a table wine distributor's license issued pursuant to 16-4-401, MCA is not qualified to own an interest~~, either as owner, partner, or stockholder~~ in:

(a) another Montana table wine distributor's license;

(b) an alcoholic beverage manufacturer;

(d) Montana retail alcoholic beverages license.

(5) Any person holding an ownership interest in a Montana alcoholic beverage manufacturer pursuant to 16-4-401, MCA is not qualified to own interest in a:

(a) Montana retail alcoholic beverage license;

(b) Montana beer wholesaler license; or

AUTH: 16-1-303, MCA

IMP: 16-4-205, 16-4-401, MCA

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.143 to adjust the language of the rule to reflect the statutory changes to 16-4-401, MCA. Section 16-4-401, MCA, changes included allowing out-of-state residents to apply for liquor licenses and updating language from "corporations" to "an entity" to reflect all types of common businesses. In addition, the proposed amendments are to improve the understanding of the separation requirements of the three-tier system. The three-tier system is set into place to prevent coercion and inducement of alcohol sales. The rule shores up the three-tier system in Montana and ensures the separation is understandable to the public.

5. Concerned persons may submit their data, views, or arguments, either orally or in writing, at the hearing. Written data, views, or arguments may also be submitted to: Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-4375; or e-mail canderson@mt.gov and must be received no later than June 11, 2010.

6. Cleo Anderson, Department of Revenue, Director's Office, has been designated to preside over and conduct the hearing.

7. An electronic copy of this Notice of Public Hearing is available through the department's site on the World Wide Web at www.mt.gov/revenue, under "for your reference"; "DOR administrative rules"; and "upcoming events and proposed rule changes." The department strives to make the electronic copy of this Notice of Public Hearing conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered. In addition, although the department strives to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.

8. The Department of Revenue maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request, which includes the name and e-mail or mailing address of the person to receive notices and specifies that the person wishes to receive notices regarding particular subject matter or matters. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the person in 5 above or faxed to the office at (406) 444-4375, or may be made by completing a request form at any rules hearing held by the Department of Revenue.

9. The bill sponsor contact requirements of 2-4-302, MCA, apply and have been fulfilled. The primary bill sponsor of HB 113 (2007 Session), Representative McChesney was contacted on March 6, 2010, by electronic mail; and the primary sponsor of SB 511 (2009 Session), Senator Tropila was also contacted on March 6, 2010, by electronic mail.

/s/ Cleo Anderson /s/ Dan R. Bucks

CLEO ANDERSON DAN R. BUCKS

Rule Reviewer Director of Revenue

Certified to Secretary of State April 19, 2010