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Montana Administrative Register Notice 42-2-835 No. 14   07/29/2010    
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BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

 

In the matter of the amendment of ARM 42.12.401, 42.12.405, 42.12.406, 42.12.408, 42.12.412, and 42.12.414 relating to restaurant beer and wine licenses and lottery process

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NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT

 

TO: All Concerned Persons

 

1. On August 19, 2010, at 2:00 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 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., August 9, 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 rules proposed to be amended provide as follows, stricken matter interlined, new matter underlined:

 

42.12.401 DEFINITIONS The following terms will be used in this subchapter.

            (1) The following terms apply to all lottery processes:

(a) "Available license" means a newly created license which can be issued by the department or an existing license that can be transferred between quota areas because of:

(i) a population increase verified by the most recent census population figures; or

(ii) a lapse or revocation of an existing license.

(b) "Conditional approval letter" is defined in ARM 42.12.106.

(c) "Continuously open to the public" means open during designated business hours on a weekly basis with no interruption in those business hours. Documented exceptions not causing unreasonable closure that would be considered are:

(i) acts of nature, such as a flood, earthquake, tornado, or blizzard;

(ii) other acts beyond the owner's control; or

(iii) a remodeling project of no greater than a one-month duration.

(d) "Existing beer/wine/all-beverages license" means either an on-premises or off-premises consumption retail license that is either currently being used at the location in question, or has been approved for nonuse status, or is a license for which a sale has occurred or is pending but not approved by the department.

(e) "Irrevocable letter of credit" means a letter of credit in which the issuing bank guarantees that it will not withdraw the credit or cancel the letter. A letter of credit may not be modified or revoked without the customer's consent.

(d)(f)  "Lottery" means an objective mechanical process to randomly select persons eligible to submit applications for available licenses.

(e)(g) "Lottery application" means a brief one-sheet application for an available license stating the applicant's name, mailing address, type of license, and quota area. If more lottery applications than the number of licenses available for any given quota area have been submitted, a lottery will be held.

      (f)(h) "Person" means any individual, firm, partnership, limited liability company, corporation, or association.

(2) The following terms specifically apply to the restaurant beer/ and wine lottery process licenses:

(a) "Existing beer/wine/all-beverages license" means either an on-premises or off-premises retail license that is either currently being used at the location in question, or has been approved for nonuse status, or is a license for which a sale has occurred or is pending but not approved by the department.

(i) A license in nonuse status does not constitute an existing license if the licensee does not own or control the applicant entity, the applicant and the licensee are not related, and the applicant and licensee are independent business entities.

"Evening dinner meal" means individually priced meals served at least four days a week for at least two hours a day between the hours of 5 p.m. and 11 p.m.

(b) "Existing preference Preference" means a preference that will be given to a restaurant owner/operator that has either existed for one year prior to the lottery deadline or was an unsuccessful lottery applicant from a previous priority provided to a restaurant beer/ and wine lottery applicant based upon eligibilityEither circumstance will give it a priority in the final ranking. An applicant with both preferences must be awarded a license before any applicant with only one preference. However, an existing preference will not supersede the limits within any quota area on licenses of restaurants with a seating capacity of 101 or more persons.

(c) "Restaurant beer/ and wine license" means a license which must be attached to a restaurant and can only be used in conjunction with a restaurant where beer and wine can only be served to patrons who order food service or who are waiting to be seatedThe licensee must agree to forego any kind of gambling, maintain 65% of business income from food sales, and must only have table service of beer and wine to those customers who are eating or waiting to be seated to eat.

(d)  "Seasonal restaurant" means one that is only open during one, two, or three seasons of any year. Seasonal restaurants can be open any part of a season or the full season, as long as the restaurant is not open year-round.

(e)  "Service bar" means an area where alcoholic beverages are stored and prepared for table service delivery to patrons for on-premises consumption. Consumption of alcoholic beverages by patrons or any other person is not permitted at the service bar.

 

AUTH: 16-1-303, MCA

IMP:  16-4-105, 16-4-201, 16-4-204, 16-4-420, 16-4-502, MCA

 

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.401 to enhance the public's understanding of the lottery and restaurant beer and wine (RBW) license terms. The amendment also seeks to conform these rules to rulemaking standards by removing more detailed language from the definitions and placing that language in other sections of the rules. These amendments are necessary to bring the rule into compliance with changes made by the 2007 Legislature in House Bill 633. In addition, the rule changes are necessary based on the changes to the restaurant beer and wine license lottery preferences and definition changes in House Bill 195 of the 2009 legislative session.

 

42.12.405 RESTAURANT BEER AND WINE LICENSE APPLICATION FEES

(1) and (2) remain the same.

(3) If an application is terminated, the $100 processing fee will be retained by the department.

(4) remains the same.

 

AUTH: 16-1-303, MCA

IMP: 16-4-420, MCA

 

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.405 because the processing fee for the license appears in ARM 42.12.111 and there is no need for duplication.

 

42.12.406 LOTTERY APPLICATION PROCESS (1) through (3) remain the same.

(4) Lottery applications must state the name of the applicant(s). All potential owners including all stockholders of a corporation, all partners of a partnership, and all members of a limited liability company with an ownership interest of 10% or more must be noted on the initial lottery application form as required for an applicant in ARM 42.12.101.

(5) If a retail license is currently issued to the location, no restaurant beer/wine license will be considered for this location. For the purposes of 16-4-204, MCA, the previous 12 months is considered the period from previous lottery publications until the new estimated census in July. Only one application per lottery offering per year is allowed for licenses issued by lottery under 16-4-204, MCA.

(6) Seating capacity will be a factor in determining the allocation of the restaurant beer/wine licenses and the appropriate fees.

(a) Using the following categories, a lottery application for the restaurant beer/wine lottery must state the exact seating capacity of the restaurant:

(i) 60 persons or less;

(ii) 61 to 100 persons; or

(iii) 101 or more persons.

(7)  Lottery applications to be included in the license lotteries can be acquired through the department.

(8) Answers to questions in the initial lottery application must be identical to answers in the subsequent application for a license. Failure to produce identical information on both documents will cause disqualification of the applicant(s).

(9) remains the same, but is renumbered (7).

(8) The following applies only to restaurant beer and wine lottery applicants:

(a) if any on-premises retail license is currently issued to the location, no restaurant beer and wine license will be considered for this location;

(b) seating capacity will be a factor in determining the allocation of the restaurant beer and wine licenses and the appropriate fees; and

(c) using the following categories, a lottery application for the restaurant beer and wine lottery must state the exact seating capacity of the restaurant:

(i) 60 persons or less;

(ii) 61 to 100 persons; or

(iii) 101 or more persons.

 

AUTH16-1-303, MCA

IMP:  16-4-105, 16-4-201, 16-4-204, 16-4-420, 16-4-502, MCA

 

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.406 to clearly outline the lottery process to the public and to address legislative changes made by the 2007 Legislature in Senate Bill 296 and House Bill 113. The proposed amendments separate the requirements for restaurant beer and wine lotteries and lotteries for other licenses awarded through the lottery process.

            The amendment to (4) addresses changes from HB 113 (2007). House Bill 113 updated statutory language to reflect all types of common business entities, not just corporations.

            The current language in (5) was moved to the new subsection to make the rule more easily understood.

            New (5) addresses new statutory changes from legislative changes made by the 2007 Legislature in Senate Bill 296. Senate Bill 296 places requirements on the lottery process for licenses issued by lottery under 16-4-204, MCA.

 

42.12.408  FINAL APPLICATION PROCESS FOLLOWING SUCCESSFUL APPOINTMENT UNDER A LOTTERY (1) The application process for a restaurant beer/ and wine license is the same as the process outlined in subchapter 1 of this chapter except for the initial licensing fee which ranges from $5,000 to $20,000 depending on the size seating capacity of the restaurant.

(2) Applicants must also meet:

(a) premises suitability requirements;

(b) investigation requirements; and

(c) public notice requirements; and

(d) eligibility claimed for a preference.

(3) remains the same.

            (4) For on-premises retail consumption beer license applications with premises that are under construction or are being remodeled, the applicant must complete the premises within a reasonable time as stated in ARM 42.12.207.

 

AUTH: 16-1-303, MCA

IMP: 16-4-420, MCA

 

REASONABLE NECESSITY: The department is proposing to add ARM 42.12.408(2)(d) to include the existing requirements of the law. If the applicant claims a preference in the lottery, the department will verify that the applicant meets the eligibility claimed for the preference prior to the application being approved.

New (4) is being proposed to include the time period a successful lottery applicant has to complete their licensed premises. The licenses are available for the benefit of the public and therefore the premises needs to be put into use within a reasonable time as outlined in ARM 42.12.207 and consistent with other licensed premises construction and remodel requirements.

 

42.12.412 WHEN LOTTERY WILL BE HELD (1) and (2) remain the same.

(3) The lottery process will be verified by a third party, not employed or associated with by the department as well as by the public who may attend the lottery drawings.

(4) remains the same.

(5) In the case of a restaurant beer/wine application, if the number of larger restaurants with seating of 101 or more exceeds the 25% maximum limit for this size restaurant a lottery will be held in order to determine which applicant will be afforded the opportunity to apply for the license. Each applicant must still meet minimum qualifications for applicants of the restaurant beer/wine license.

 

            AUTH16-1-303, MCA

            IMP:  16-4-420, MCA

 

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.412(3) because the department will contract with another state agency to be the third party to verify lotteries. In addition, the department is proposing to delete ARM 42.12.412(5). By removing this rule language and providing all lottery applicants equal opportunity, the department believes it provides more flexibility for restaurant business opportunities within Montana. A successful lottery applicant who initially sought a license with seating of 101 or more will be afforded the opportunity to apply for a license of lesser seating if the 25% maximum for licenses with seating of 101 or more has been met.

 

42.12.414 HOW APPLICANTS WILL BE CHOSEN (1) remains the same.

(2) In addition, successful applicants for a restaurant beer/wine license will be chosen based upon:

(a) qualified seating capacity:

(i) 60 persons or less;

(ii) 61 to 100 persons; or

(iii) 101 or more persons; and

(b) whether the applicant is eligible for an existing preference.

(3) The department will construct a list of the applicants in the order in which they were drawn in the lottery.

(a) For a restaurant beer/ and wine lottery applicant, the department personnel will then look to see, determine within this ordering, which restaurants applicants have an existing claimed a preference and the seating capacity of the restaurant.

(b) A preference must be given to any applicant who:

            (i) does not have a restaurant beer and wine license or a retail beer license in any quota area; and

            (ii) operates a restaurant for at least 12 months immediately prior to filing of an application in that quota area. This preference will be verified at the time of license application.

            (c) An applicant with a preference will be given a priority in the final ranking.

            (d) A preference will not supersede the limits within any quota area on licenses of restaurants with a seating capacity of 101 or more persons.

(b)(e) A final ranking of applicants will then be made.

(c)(f)  The department will not issue to the restaurants shown in (2)(a)(iii) with a seating capacity greater than 101 more than 25% of the available restaurant beer/ and wine licenses in any given quota area. This may result in a quota area not being able to immediately award all of its available restaurant beer/ and wine licenses.  This could also result in larger restaurants who have received a preference being unable to receive a restaurant beer/ and wine license for seating capacity greater than 101 if many larger restaurants apply to the initial lottery in a given area.

(g) A successful lottery applicant that requested to have a restaurant with seating capacity greater than 101 but the seating quota is full may elect to apply for a license with less seating capacity.

(4)(3)  A successful applicant cannot sell his ranking nor can the applicant transfer his ranking to another.

 

            AUTH16-1-303, MCA

            IMP:  16-4-105, 16-4-201, 16-4-204, 16-4-420, 16-4-502, MCA

 

REASONABLE NECESSITY: The department is proposing to amend ARM 42.12.414 to enhance the public and applicant's understanding on how lotteries are conducted, preferences will be applied, and the 25% seating quota is administered for seating capacity over 101.

The department is proposing to delete the language in (2) to allow more flexibility and fairness to restaurant business. A successful lottery applicant who initially sought a license with seating of 101 or more will be afforded the opportunity to apply for a license of lesser seating if the maximum licenses have been met for seating over 101. New (2) is necessary to bring the rule into compliance with changes to the lottery preferences made by the 2009 Legislature in House Bill 195.

 

4. 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 September 3, 2010.

 

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

 

6. 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.

 

7. 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 4 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.

 

8. The bill sponsor contact requirements of 2-4-302, MCA, apply and have been fulfilled. The primary bill sponsor for SB 296 (2007), Senator Weinberg was notified by regular mail on August 10, 2007. The primary following bill sponsors were all notified by electronic mail on March 6, 2010: Representative McChesney for HB 113 (2007); Representative Dutton for HB 633 (2007); and Representative Hamilton for HB 195 (2009).

 

 

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

CLEO ANDERSON                          DAN R. BUCKS

Rule Reviewer                                   Director of Revenue

 

Certified to Secretary of State July 19, 2010

 

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