Lawmakers unveil bill to revamp Prohibition-era liquor license rules

A long-awaited bill that would phase out New Jersey’s Prohibition-era liquor license limits over the next six years includes far laxer rules for breweries and wineries, provisions that would allow towns to reclaim inactive licenses, and relatively paltry tax credits for existing license holders.

Lawmakers and Gov. Phil Murphy have sought to increase the availability of liquor licenses given to bars and restaurants — they’re currently limited to one for every 3,000 residents in a given town — while loosening rules that have chafed brewers and distillers. Murphy in January pitched the proposed changes as a potential boost for small businesses, calling the state’s existing liquor license system “antiquated and confusing.”

But that push has faced opposition from existing license holders who have paid hundreds of thousands of dollars — or more than $1 million, in some cases — for their licenses, which will decrease in value once towns can issue more of them. The tax credits present in the bill introduced this week, intended to defray some of the loss in license value, are unlikely to leave them satisfied.

“The significant investment made by current license holders must be appropriately recognized. The value of these investments, often held as collateral by financial institutions, will instantly diminish once new licenses are added to the market,” said Dana Lancellotti, president of the New Jersey Restaurant and Hospitality Association. “We must support these small business owners who will face tremendous losses overnight.”

The one-time refundable tax credit would be worth between $30,000 and $50,000 based on the license holder’s total taxable sales in the last three calendar years. Sen. Gordon Johnson (D-Bergen), the bill’s prime Senate sponsor, said that number isn’t fixed in stone.

“This is just a bill in its infant stage, so to speak — just introduced. The number is subject to change, of course, as the bill goes through the process,” he said.

License Limits

If approved, the bill would loosen New Jersey’s license limits by 10% at a time, reducing the threshold to one license per 2,700 residents in 2024, one per 2,430 in 2025, and so on until reaching a nadir of one license per 1,771 residents in 2028.

The limit would phase out altogether in January 2029. 

But the bill makes no allowance for small towns — including those with fewer than 3,000 residents — that would see limited impact from the looser limits before 2029. Johnson said the bill may be amended to immediately grant small towns additional licenses.

“They want assistance in their downtowns as soon as possible, so we’ve got to figure out how to help them and what they do, so that’ll be another discussion,” Johnson said.

According to census data, 115 New Jersey municipalities have populations smaller than 3,000 residents. Of those, 68 municipalities have fewer than 1,771 residents and — barring population increases — would see no changes to their liquor license limits until the limits are phased out entirely in 2029.

In all cases, municipalities would maintain the power to grant licenses within their borders.

Tax credits for license holders

The tax credit levels in the bill were suggested by the Murphy administration, according to Johnson.

Under the bill as introduced, the tax credit level falls as sales rise. Those with less than $1.5 million in taxable sales in all three preceding calendar years would get $50,000, while those whose sales exceeded $2.9 million in any of those three years would receive $30,000. Those in the middle would be eligible for a $40,000 credit.

The measure would allow local elected officials to deny license renewal requests made on licenses inactive for two or more years if they find the licensee has not made a good faith attempt to begin using the license.

But the proposal does not include provisions sought by industry groups that would allow towns to transfer inactive licenses between themselves, though Johnson said those may be added.

Under current law, holders of inactive licenses can seek extensions from the Division of Alcoholic Beverage Control.

Johnson said he has meetings planned with industry stakeholders to discuss the proposal in the coming weeks.

Brewers, vintners, and distillers get their wish

The proposal would lift a spate of restrictions the Division of Alcoholic Beverage Control imposed on breweries last July.

Those rules capped the number of events breweries could hold at 25 per year and barred them from offering meals on site, though they were allowed to provide token food items like crackers and pretzels.

Those prohibitions also barred coordination with food trucks and prevented brewers from offering customers take-out options from nearby restaurants.

The bill would also eliminate a requirement that breweries and distilleries give their customers full tours before selling alcoholic beverages for taproom consumption.

Brewery owners say New Jersey’s rules limit their growth. Changes have been opposed by some restaurant owners who say they would create unfair competition, citing the dramatically higher cost for liquor licenses compared to brewery licenses.