The Glass is Half Full: An Update on Governor Murphy's Proposal Regarding Liquor Law Reform In New Jersey

Governor Murphy recently held a roundtable discussion with restaurant owners and fellow government officials, where he discussed his proposal to modernize the state’s liquor license laws. The proposal was teased in Governor Murphy’s State of the State Address earlier in the year, though details of the plan were formerly unknown. We now know that Governor Murphy’s goal is to create equity in the liquor license industry by expanding the number of licenses available and lowering the costs of those licenses, allowing for local small businesses to participate in this seemingly exclusive industry and boost the economy.

The proposal seeks to restructure New Jersey’s liquor laws by achieving the following:

• Phase out the population gap (limiting the number of liquor licenses in each municipality to 1 for every 3,000 residents) over a five-year span, while reducing seasonal retail consumption licenses each year by 10% during the same timeframe, until completely removed. Once the population gap is phased-out, local authorities may issue licenses without a cap, leaving each authority to determine and regulate the number and type of licenses issued in the municipality.
• Distribute a means-tested tax credit to current plenary retail consumption license holders, in the hopes of reducing the impact of the proposal on those who have already made significant investments in purchasing liquor licenses. The tax credit would be based on taxable sales within the preceding three calendar years ($50,000 if less than $1.5 million; $40,000 for up to $2.9 million, and $30,000 for over $2.9 million).
• Establish administrative prices and fees for new licenses. New licenses would be issued at progressive prices and associated fees would be based on business size and number of employees. These prices would be set and reviewed annually by the ABC, while local authorities would be able to assess local fees on issuing new licenses with a cap on the annual renewal fee not to exceed $2,500.
• Ease restrictions on breweries, distilleries, and wineries, allowing them to serve food, attend an unlimited number of off-site events, and hold an unlimited number of on-site events. Those with Restricted Brewery Licenses could convert to a Limited Brewery License and receive these new benefits for a fee to be determined by the ABC.
• The repatriation of inactive licenses, so that licenses that have been purchased but not in use for more than two years can no longer be held indefinitely. Existing licenses that have been inactive for five years preceding the enactment of this legislation would transfer to the respective municipality for reissuance at a public sale. The plan removes the ABC’s authority to renew inactive licenses and gives municipalities the authority to deny or renew inactive licenses if the license holder has not made a good faith effort to actively use the license.

The plan was introduced in the legislature in late February, and should the law be enacted, these rules could go into effect as early as January 2024. However, the proposal has hit a major obstacle. According to Senator Paul Sarlo, the plan does not have a lot of support in the Legislature. Senator Sarlo suggests that instead of expanding the number of liquor licenses, the state should first address the 1,195 inactive licenses that continue to get renewed. Despite the fact that the plan does contain a section aimed at addressing this concern, Sarlo’s comments have received support from other lawmakers.

Similarly, alternative proposals have been introduced, aimed at fulfilling Governor Murphy’s goals without threatening the fair market value of current liquor licenses. The Coalition for Responsible Alcohol Licensing introduced a four-part proposal that consists of transferring inactive liquor license to towns in need at the benefit of the original owner, creating a new “mall license” for businesses in regional malls so that existing retail licenses can be relocated to other areas in need of development, lowering the threshold to qualify for a “Smart Growth” license, and utilizing the New Jersey Economic Development Authority to subsidize new entrants into the marketplace with specifically-tailored and low-interest loans or grants.

Liquor license reform has long been a highly controversial topic in New Jersey for over a decade and remains so. Lawmakers, local businesses, and those already in the industry are passionate on both sides of the debate. No matter which proposals are considered, it is clear there are significant concerns that must be addressed before unity in reform ideation will be achieved.

For more information regarding Governor Murphy's liquor law reform in the state of New Jersey and what that means for your business, please contact firm Counsel Bruno Genova, Esq. via email here, Associate Sydney M. Schubert, Esq. via email here, or call 973.533.0777.

This Genova Burns publication is to provide further information regarding a previously posted publication on New Jersey’s liquor law reform.