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------=_NextPart_01C401C1.8C61C4B0 Content-Location: file:///C:/CC09C633/CPA_WIC_2003_files/master09.xml Content-Transfer-Encoding: quoted-printable Content-Type: text/xml; charset="utf-8" ------=_NextPart_01C401C1.8C61C4B0 Content-Location: file:///C:/CC09C633/CPA_WIC_2003_files/pres.xml Content-Transfer-Encoding: quoted-printable Content-Type: text/xml; charset="utf-8" ------=_NextPart_01C401C1.8C61C4B0 Content-Location: file:///C:/CC09C633/CPA_WIC_2003_files/slide0001.htm Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii" Grape Quality: In the Eye of the Beholder?
12/9/= 03
www.= cmprlaw.com
1
Alternating Proprietorships
lCalifornia CPA Wine Industry Conference
lDecember 9, 2003
l
lJay M. Behmke
lCarle, Mackie, Power & Ross LLP
l100 B Street, Suite 400
lSanta Rosa, CA 94101
lTel. 707-526-4200
ljmbehmke@cmprlaw.com
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12/9/= 03
www.= cmprlaw.com
2
Carle, Mackie, Power & Ross LLP
lWin= e and Food Practice
–Formation
–Investments
–Loans
–Real Estate Purchases
–Land Use and Permits
–Vineyard Leases
–Grape Contracts
–Acquisitions
–Licensing and Compliance
–Trademarks
–&= #13;
lAtt= orneys
–Bill Carle
–John Mackie
–Simon Inman
–Phillip Kalsched
–Jay Behmke
–
l&= #13;
Wineri= es
Grower= s
Distri= butors
Retail= ers
Lender= s
Invest= ors

Gra= pe Contracts
Vin= eyard Leases
Lic= ensing and Regulation
Mer= gers and Acquisitions
Tra= demarks

Attorn= ey since 1983
Attorn= ey in Wine and Grape Industry since 1992
CFO, B= elvedere Winery (350,000 cases) and
Hambre= cht Vineyards (500 acres) 1988-1992
Two im= portant achievements
   Sunridge Nurseries, ENTAV = clones
   CAWG, Chardonnay with natu= ral flavors
Experi= ence on both sides
Buying= and selling
Termin= ating and enforcing
Drafti= ng for winery and grower
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12/9/= 03
www.= cmprlaw.com
3
Alternating Proprietorships
<= span style=3D'font-size:86%'>lWhat is an AP?
<= span style=3D'font-size:86%'>lWhy do you want one?
<= span style=3D'font-size:86%'>lHow do you get one?
<= span style=3D'font-size:86%'>lWhat problems do they create for TTB? <= /span>
<= span style=3D'font-size:86%'>lWhat is TTB doing about it?
<= span style=3D'font-size:86%'>lHow can a person holding an AP stay out of trouble?
Over l= ast 14 years, there has been a definite evolution

Concep= ts of quality

Grapes= are custom farmed

Wineri= es are more involved with farming

Grape = contracts have not caught up. We lawyers have work to do with our clients to help them define what the issues are.

This t= alk is a part of that effort. Because I think the question I was asked to talk about, is itself a mistaken question.
ItR= 17;s not how to define quality that’s the problem,
ItR= 17;s who gets to define it, that’s the issue.
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12/9/= 03
www.= cmprlaw.com
4
What is an Alternating Proprietor?
lAn AP is a person with a federal basic permit= who shares a physical winery facility with anoth= er permittee.
Crush Pad
Fermentati= on
Tanks
Bottling
Host Winer= y
Exclusive = Area
AP
Exclusive = Area
Create= d in 1990
ATF at= time was responding to experience with unauthorized persons making wine in licensed wineries. Typical winemaker favor for a winemaker friend. But there were = lots of cases.
ATF wa= nted to find a way to permit the practice but make it legal.
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12/9/= 03
www.= cmprlaw.com
5
Federal and State Permits
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12/9/= 03
www.= cmprlaw.com
6
Why set up an AP?
lTaxes! Federal excise tax on wine.
lIn 1990, Congress raised ex= cise taxes on wine from $0.17 per gallon ($0.40/case)        = ;          to     $1.07 per gallon ($2.54/case).
lSmall producer’s tax = credit.
–Ferment < 150,000 gallons/year (62,500 cases).
–$0.90/gallon on first 100,000 gallons removed.
–Total savings =3D $90,000
150,00= 0 gallons =3D 62,500 cases
From 1= 50,000 gallons to 250,000 gallons (104,000 cases), credit is phased out.
Over 2= 50,000, no credit.
Added = by Bob Packwood, US Senator from Oregon at the time.
Since = Oregon wineries were all small at the time, exempted the entire industry in Oreg= on from the increase
As par= athetical - the credit probably violates the equal treatment of trade rules under the WTO. Small producer’s credit not available for foreign wineries - so they have to pay the full tax.




------=_NextPart_01C401C1.8C61C4B0 Content-Location: file:///C:/CC09C633/CPA_WIC_2003_files/slide0033.htm Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii" Grape Quality: In the Eye of the Beholder?
12/9/= 03
www.= cmprlaw.com
7
Visualize money in your pocket
<= span class=3DBB style=3D'position:absolute;left:-4.25%;top:.3em'>lWinery produces 300,000 gallons= per year
<= span class=3DBB style=3D'position:absolute;left:-4.53%;top:.3em'>lOne big customer uses 150,000 gallons
<= span class=3DBB style=3D'position:absolute;left:-4.57%;top:.3em'>lTotal excise taxes =3D $321,000=
l<= /span>Set up host winery and AP
Produce 150,000 gallons in each
<= span class=3DBB style=3D'position:absolute;left:-4.08%;top:.3em'>lHost pays $160,500 less $90,000 =3D $70,500
<= span class=3DBB style=3D'position:absolute;left:-4.23%;top:.3em'>lAP pays $160,500 less $90,000 =3D $70,500
<= span class=3DBB style=3D'position:absolute;left:-4.57%;top:.3em'>lTotal savings =3D $180,000<= /span>
Seems = like a small amount of money to some of you

But fo= r small wineries this could make all the difference.


------=_NextPart_01C401C1.8C61C4B0 Content-Location: file:///C:/CC09C633/CPA_WIC_2003_files/slide0010.htm Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii" Grape Quality: In the Eye of the Beholder?