BY: HINMAN & CARMICHAEL LLP
UPDATED OCTOBER 23, 2017
The wildfire tragedy spread across four counties over the last two weeks has caused the tragic loss of homes, livelihoods and lives. As the fires are brought under control the industry is now turning to rebuilding homes and businesses. The challenges will be many, from potentially billions of dollars in insurance claims to finding contractors, from harvesting grapes to protecting fermenting wine from smoke taint, from helping employees find housing to staffing tasting rooms, restaurants and hotels. Our friends and colleagues are rolling up their sleeves, and so are we. There’s no way around the fact that rebuilding after the wildfires pass will be difficult, expensive and time-consuming, but we know our community will come together to support each other during this difficult time.
As lawyers who serve the alcohol beverage, hospitality and cannabis industries, we offer an updated summary below of some of the main regulatory considerations for industry members, and those who work within these industries especially hit hard by these fires. Unfortunately, our guidance for cannabis businesses, because of the unsettled legal landscape, remains short.
Hinman & Carmichael will be offering free initial consulting services to wineries, breweries, distilleries, restaurants, retailers, resorts, hotels and other alcoholic beverage licensees for any legal issues related to or arising from the fires. In addition, our colleagues at Compli have offered free consultation services for wineries and vineyards seeking relief from the TTB, and our colleagues at Wine Compliance Alliance have offered complimentary assistance to any winery in Sonoma or Napa County seeking relief from the TTB.
ALCOHOL BEVERAGE INDUSTRY RESOURCES AND CONSIDERATIONS
The alcoholic beverage industry, which is regulated by a myriad of federal, state and local agencies, is subject to a plethora of special agency protocols that come into play when disasters strike. The major agency resources available to industry members at this critical time are summarized below, agency by agency.
Because every retail and production premises is licensed as a structure (with diagrammed premises, including bonds for producers), if a building has burned down or been destroyed, the premises may not still be suitable for operations. Where and how a licensee can continue operations pending rebuilding (or re-opening, if partial damage occurs) will be an issue for many wildfire victims. The regulatory agencies should be cooperative and will do their best to waive otherwise inflexible requirements.
California Office of the Governor
Governor Brown issued Executive Order B-43-17 to streamline recovery efforts in communities affected by the wildfires. The order gives the California Department of Alcoholic Beverage Control discretion to waive the 500-foot limitation and 180-day period for businesses forced to relocate because of the wildfires and discretion to waive transfer fees beyond the time limitations set by law.
Alcohol and Tobacco Tax and Trade Bureau (TTB)
Manufacturers, wholesalers, retailers, and export warehouse proprietors of alcoholic beverages who experience fire or other casualty losses may be eligible for tax relief from the TTB. Proprietors may make claims with the TTB for the payment of federal excise taxes paid on alcoholic beverages. The TTB is also waiving tax penalties for those affected by the fires. The Wine Compliance Alliance published a video [link] explaining TTB paperwork requirements.
- Waiver of Excise Tax Penalties for Businesses Affect by the California Wildfires: For those unable to file or timely make payment or deposit of excise taxes
- When Disaster Strikes: Guidance on filing claims for payment (refund or allowance of credit) of federal excise taxes paid of alcoholic beverages
- Disaster Relief: Waivers, forms, and other resources
- Napa Earthquake: FAQs: Offers guidance on filing claims for loss, temporary storage, and record keeping after a disaster. This industry guidance FAQ is from the last major natural disaster to strike Napa. We expect these policies will be initiated for wildfire damage and destruction.
California State Board of Equalization (BOE)
The BOE offers emergency tax and fee relief for business owners and feepayers. An extension of up to three months to file and pay taxes and fees is available for the alcoholic beverage tax and an array of other BOE administered programs (listed here).
- Disaster Relief FAQs
- Disaster Relief for Property Taxes
- List of County Assessors and Contact Information
California Department of Alcoholic Beverage Control (ABC)
As anticipated, the ABC published an advisory for ABC licensed businesses affected by the wildfires. The advisory outlines issues, including business relocation, storage, product damage and returns, fee waivers, tied house exceptions for natural disasters, closure of premises, and more.
California Department of Insurance
For all insurance claims, contact your insurance company or your agent as soon as possible to gather information to file a claim. If partial damage has occurred, take steps to prevent further damage, take photos of the damaged property, and prepare an inventory of the damaged property. If the damage is extensive, you should not return to your homes and businesses until emergency personnel have cleared the area for reentry. If you haven’t been evacuated yet, but the threat still exists, take photos or take a video of your belongings and keep any receipts.
The California Department of Insurance Resources for Business and Homeowners:
- Don’t Get Burned After a Disaster: How to avoid scams and fraud
- Commercial Insurance Guide: Includes loss due to property damage, business interruption, theft, liability, and worker injury
- Residential Property Claims Guide: Includes property damage to homes, personal property, and additional living expenses (e.g., food, transportation, temporary residence)
United States Department of Agriculture (USDA)
The U.S. Department of Agriculture’s Risk Management Agency operates and manages the Federal Crop Insurance. If you have a Federal Crop Insurance policy—which only covers crops, not vines—claims may be made due to direct damage, smoke taint and potentially an inability to harvest.
U.S. Department of Food and Drug Administration (FDA)
All alcoholic beverage manufacturers should be registered with the FDA as a “food manufacturer” unless they qualify for a registration exemption. All registered manufacturers are subject to the FDA’s record-keeping and reporting requirements under the Bioterrorism Act and the newer Food Safety and Modernization Act. Anyone with production spoilages or losses (whether in production or finished product not yet distributed) should document these in detail by variety or brand name, vintage, volume of product lost or spoiled, and lot numbers, if available. Stay posted for specific reporting procedures for these losses for each category of alcoholic beverages once the emergency settles.
California Department of Food and Agriculture (CDFA)
The CDFA has extended the application deadline for the 2018 Specialty Crop Block Grant Program (here).
Internal Revenue Service (IRS)
The IRS is providing relief to seven California counties: Butte, Lake, Mendocino, Napa, Nevada, Sonoma and Yuba. In these counties, individuals and businesses have until January 31, 2018 to file certain tax returns and make certain tax payments.
Other tax resources:
CANNABIS INDUSTRY RESOURCES AND CONSIDERATIONS
The fires are also devastating the cannabis industry. The timing is especially terrible since we are two and a half months away from the launch of state licensing. Our best suggestion for those still planning to seek state licensing after this tragedy is to protect the records and documentation required for temporary licensing, including business records, local jurisdiction authorizations or permits, and deeds or leases (information about temporary licenses here). As local and state licensing is about to come online, many of the same concerns regarding areas that may no longer be suitable for their intended and permitted use will apply to the cannabis space, as discussed above for alcohol licensees.
While there are unfortunately not the same government or insurance resources available as for the alcohol and hospitality industry (for example, cannabis cultivators and manufacturers do not qualify for crop insurance or federal emergency relief funds), the cannabis community is turning out to support those in need. Merry Jane has collected a number crowdfunding campaigns that have launched to support members of the industry affected by the fires, including one organized by CalGrowers to help affected farmers.
Looking for ways to donate, volunteer, or deliver supplies?
The Wine Institute has published a list (here) on how to help, including links to donate to local disaster relief funds. The Bay Area’s www.7x7.com also has an extensive list detailing where you can make donations, deliver supplies, and which organizations are seeking volunteers (updated daily here). For the animal lovers among you, donations can be directed towards Jameson Animal Rescue Ranch here.
What else can we all do? Buy wine from the affected wineries, and schedule holiday events at Napa, Sonoma and Mendocino wineries.
- The Team at Hinman & Carmichael LLP