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F I S C A L I M P A C T R E P O R T

SPONSOR Taylor

DATE TYPED 03/02/05 HB

SHORT TITLE Corporate Liquor License Notice Provisions

SB 815

ANALYST McSherry

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

NFI ($60.0)

($60.0) Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Regulations and Licensing Department (RLD)

SUMMARY

Synopsis of Bill

The bill proposes to repeal Section 60-6B-6 “Corporate licensees; limited partnership licensees;

reporting” Liquor Control Act and replace it with a new section: “Relating to Business Licenses;

Changing the Notice Provisions for Corporate Licensees.”

The existing section requires notification of the Director of the Alcohol and Gaming Division

(AGD) in the Regulations and Licensing Department (RLD) within thirty days after the occur-

rence of any change in a corporation, of the officers, directors or holders of more than ten per-

cent of the voting stock or of any change, and in a limited partnership, notification of general

partners or limited partners contributing ten percent or more of the total value of contributions.

The existing section also requires that any legal entity that is not a corporation or limited partner-

ship is also required to notify the director of any change in the trustees or partners or owners of

more than a ten percent interest in the entity. Any change of 10 percent interest or greater is

treated as a transfer of ownership and the notification requires the filing of an application to be

submitted along with a $200 application fee.

The proposes bill provides that a licensee must notify the director within 30 days regarding any

change to shareholders, partners, or members of the licensee if a direct or indirect owner of the

Senate Bill 815 -- Page 2

license unless: an officer, director, partner or member, who resigns or is terminated, was not re-

quired to be disclosed on the initial liquor license application, or if any person who is required to

be disclosed resigns and is not replaced. The proposed bill does not require a new application

fee for ownership changes.

Corporation changes would not constitute transfers of ownership of a liquor license under the

proposed bill when:

1)

a license elects new officers or directors that would be required to be disclosed

when the licensee acquires the license from a different person;

2)

the transfer of a liquor license to another person where all direct or indirect owners

of ten percent or more of the transferee are also direct or indirect owners of ten per-

cent or more of the licensee;

3)

a person who owns, directly or indirectly, more than ten percent of the licensee ac-

quires additional interest in the license;

4)

a person acquires a direct or indirect interest in the licensee but does not acquire

more than ten percent;

5)

the transfer of an ownership interest in the licensee to a person who has been in-

volved in the business of the licensee for more than two years;

6)

the merger of two corporations that are publicly traded and have been previously

qualified to own one or more liquor licenses in New Mexico; and

7)

the acquisition of a publicly traded corporate licensee, or a majority of the assets

that are located at one or more licensed premises.

The bill further provides that the AGD director, could, by rule, define further changes in the li-

censee that would not constitute a transfer of ownership;

A limited application would have to be submitted to the director if the change in licensee is not a

transfer of ownership. For limited applications, hearings, notices, tax clearances and liquor

wholesaler clearances would not be required to be conducted.

Significant Issues

Revenues from submission of license fees would be reduced as the $200 fee would no longer be

required.

The Director of the Alcohol and Gaming division could change the instances recognized as trans-

fers of ownership as proposed in this bill.

FISCAL IMPLICATIONS

According to RLD, fiscal implications could be substantial. Currently, a $200 application fee is

required to be submitted for all applications; the amount collected by the department for these

applications currently is approximately $60,000 dollars (300 applications).

RLD further reports that because tax clearances from the New Mexico Taxation and Revenue

Department (TRD) and wholesaler’s clearances are not required if changes as discussed in the

bill do not constitute a transfer of ownership, debts to TRD and wholesaler’s may not be col-

lected in instances where a limited application has been filed. Currently, any change of 10% in-

terest or greater is treated as a transfer of ownership and as such, tax and wholesaler’s clearances

are required.

Senate Bill 815 -- Page 3

ADMINISTRATIVE IMPLICATIONS

The Director of the Alcohol and Gaming Division would be able to determine additional re-

quirements by rule to define further the licensees which would not constitute transfer of owner-

ship and the division would be responsible for determination of ownership changes notification

compliance under the proposed statute.

TECHNICAL ISSUES

RLD asserts that it is unclear whether notice or application would be required if an officer, direc-

tor, partner or member who is not required to be disclosed on the initial application resigns or is

terminated or if any person who is required to be disclosed resigns and is not replaced.

OTHER SUBSTANTIVE ISSUES

The bill allows the AGD Director to expand the instances that would not be considered a change

of ownership of a licensee. This provision creates the potential for increasing leniency regarding

business notification of changes in ownership.

RLD points out that the bill provides that the transfer of an ownership interest in the licensee to a

person who has been involved in the business of the licensee for more than two years does not

constitute a change in ownership. The bill does not discuss what “be involved in the business of

the licensee for more than two years” means. As written, this person(s) would not be required to

be disclosed or fingerprinted. “Person”, under the Liquor Control Act means any person or any

legal entity.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

The current requirements for notification section of the Business Licenses Act would remain

enacted.

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