Summary:

 House Bill 417 (HB 417) makes several changes to the Liquor Excise Tax Act, including amending tax distributions, imposing a new liquor excise surtax, and creating the Tribal Alcohol Harms Alleviation Fund. The bill also renames the Local DWI Grant Program Act as the Local Alcohol Harms Alleviation Program Act, expands its funding and scope, and establishes new reporting requirements for alcohol tax revenues. HB 417 takes effect on July 1, 2025. 

Legislation Overview:

 House Bill 417 (HB 417) restructures the distribution of liquor excise tax revenue and introduces a new liquor excise surtax on alcohol retailers. The surtax, set at 6% of the retail price of alcoholic beverages, is imposed on sales not for resale. Revenue from the surtax will be directed to the newly created Tribal Alcohol Harms Alleviation Fund, which will provide grants to tribal nations and organizations addressing alcohol-related harms in Indigenous communities.

The bill renames the Local DWI Grant Program Act as the Local Alcohol Harms Alleviation Program Act, expanding the eligible uses of funds beyond impaired driving prevention to include general alcohol harm reduction initiatives. The local alcohol harms alleviation fund will receive 94% of net liquor excise tax revenue, while 6% will be allocated to the drug court fund.

HB 417 also mandates that the legislative finance and revenue stabilization committees review liquor excise tax rates and distributions by December 1, 2032, to assess whether changes should be made. It excludes liquor excise tax revenues from the definition of “gross receipts” for taxation purposes and revises reporting requirements for tax-exempt sales. The bill takes effect on July 1, 2025.

Implications

HB 417 increases alcohol tax revenue allocations for prevention, treatment, and harm reduction programs, particularly in tribal communities. The new surtax could generate additional funds, but it may also increase alcohol prices, potentially impacting sales and tax collections. The shift in focus from impaired driving prevention to broader alcohol-related harm reduction may improve public health outcomes but could reduce targeted funding for DWI prevention programs.

Administrative changes, including new reporting and review requirements, will increase oversight of liquor tax expenditures. However, businesses subject to the new surtax may experience compliance burdens, and consumers may face higher alcohol costs.
 

Current Law:

 Under current law, liquor excise tax revenues are allocated primarily to the Local DWI Grant Fund, with smaller distributions to specific alcohol treatment programs. No separate liquor excise surtax exists, and tax revenues are not specifically directed to tribal alcohol harm reduction efforts. 

Amendments:

 Amended February 24, 2025 in HTRC:

HTRCa/HB 417: The House Taxation & Revenue Committee made two substantive changes to HB 417:

1.  Exclusion of Small Alcohol Producers from the Liquor Excise Surtax
The first amendment, which excludes small alcohol producers from the Liquor Excise Surtax, addresses concerns that the additional tax could disproportionately harm small businesses and local craft industries. Winegrowers, small brewers, and craft distillers typically operate on thinner profit margins than large alcohol retailers. By exempting them from the surtax, the amendment reduces the financial burden on these small businesses while still maintaining the broader taxation structure for larger alcohol retailers.

This exclusion, however, may slightly reduce the projected revenue for the Tribal Alcohol Harms Alleviation Fund, which was set to receive 100% of the Liquor Excise Surtax revenues. The full fiscal impact depends on the proportion of alcohol sales that come from small producers versus large retailers. While it protects local businesses, it could limit funding growth for alcohol harm reduction programs unless alternative revenue sources are considered in the future.

2.  Transition Rule for Local Alcohol Harms Alleviation Fund Distributions
The second amendment, which clarifies the transition of grant fund distributions, ensures that counties will not experience a disruption in funding as the Local DWI Grant Fund is replaced by the Local Alcohol Harms Alleviation Fund. This prevents gaps in funding for substance abuse prevention, treatment, and intervention programs that rely on these quarterly payments. By guaranteeing that all scheduled payments through June 2026 will be made under the new fund, the amendment provides continuity and stability for local programs while allowing time for the new system to take effect.

These amendments ensure that small alcohol producers are not burdened with the new surtax and clarify how existing local grant distributions will continue during the transition to the new funding structure.