Does Tennessee's Alcoholic Beverage Commission have authority to require licensed distilleries to report the names of corporate shareholders and officers, and any change in those?

Plain-English summary

Tennessee's Alcoholic Beverage Commission (ABC) regulates licensed distilleries. The licensing scheme has several requirements that turn on who actually owns and runs the company, citizenship of all shareholders, no felony convictions in the prior 10 years, no overlapping interests in wholesalers or retailers, and no employment of convicted felons.

Rep. Timothy Hill asked AG Slatery whether the ABC has authority to demand that distillery corporations report the names of current shareholders and officers, including reporting changes in ownership; whether any percentage threshold of ownership change triggers the duty; and whether any distilleries are exempt.

The AG answered: yes, no, and no.

• Yes, ABC has the authority by necessary implication. No statute expressly says "report shareholders," but several statutes turn on shareholder identity. To enforce them, the ABC must be able to ask. Section 57-3-104 grants the ABC enforcement authority over chapter 3 of title 57; § 57-3-104(c)(5) authorizes the ABC to prescribe forms. Combine those with the substantive ownership-related disqualifiers (§§ 4-58-103(1), 57-3-202(b), 57-3-210(d), (e), (i)) and the annual renewal duty (§§ 57-3-213(a)-(c)), and the ABC's authority to demand the information is the inevitable corollary.
• No threshold percentage applies. No Tennessee statute sets a 10%, 20%, or any other threshold for when an ownership change must be reported. The implied reporting duty is general.
• No exemption applies. Tennessee statutes do not carve out any category of distillery from these reporting expectations.

Question 4 asked whether any non-existent exemption would violate equal protection. The AG referred back to Question 3: there is no exemption to evaluate.

Currency note

This opinion was issued in 2018. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The licensing rules in Tenn. Code Ann. ch. 57 and the ABC's procedural rules have been amended in subsequent legislative sessions. Distilleries should confirm current ABC rules and any current change-of-control filing requirements directly with the ABC.

Common questions

Q: What is "necessary implication"?
A: Tennessee administrative law treats agencies as creatures of statute (McFarland v. Pemberton). Their powers are limited to those expressly granted plus those necessarily implied to carry out the agency's mandate. The implied power must trace back to the language of the statute (Wayne County v. Tenn. Solid Waste Disposal Control Bd.). It is not a free-floating residual power.

Q: Why does the ABC need to know who the shareholders are?
A: Because Tennessee's distillery-licensing rules turn on ownership characteristics. All shareholders must be U.S. citizens (Tenn. Code Ann. § 57-3-202(b); see also § 4-58-103(1)). No distillery license issues to a person convicted of certain offenses in the past ten years (§ 57-3-210(d)). Distilleries cannot have any interest in a wholesale or retail business (§ 57-3-210(e)). And distilleries cannot employ convicted felons (§ 57-3-210(i)). Each of these rules is unenforceable without ownership and personnel information.

Q: Does this mean any single share transfer must be reported?
A: The opinion does not set a bright-line threshold; it simply states that no statutory provision establishes a specific threshold percentage. The ABC has express authority to prescribe the form used for such reporting under § 57-3-104(c)(5).

Q: Does the ABC need a court order to ask for shareholder information?
A: No. The reporting duty arises from the licensing relationship itself. A licensed distiller owes the agency the information it needs to administer the license. A refusal to comply with a properly prescribed reporting form would put the license at risk under the ABC's enforcement authority.

Q: What about LLC distillers, not corporations?
A: The opinion frames the question and answer in terms of corporations because that was how the question was asked. It does not address other entity forms such as LLCs, and the statutory disqualifiers it relies on (for example § 57-3-202(b)) are written in terms of shareholders. How the same reporting logic would extend to a non-corporate distiller is outside what this opinion decided.

Q: Could the legislature pass a law exempting craft or small distilleries?
A: It could. The opinion's role is descriptive: as of January 2018, no such exemption existed. If one were enacted, equal-protection analysis would depend on the carve-out's structure. The AG declined to evaluate a hypothetical exemption.

Background and statutory framework

The Alcoholic Beverage Commission is a Tennessee state agency that administers Title 57, Chapter 3, governing alcoholic beverages including spirits production. Section 57-3-104 grants the ABC enforcement authority over the chapter. Subsection (c)(5) gives the ABC the authority to "[p]rescribe all forms of applications and licenses and tax stamps, and of all reports and all other papers and documents required to be used under or in the enforcement of this chapter."

The substantive ownership-related rules are scattered through chapter 3 and a related chapter 58:

• § 4-58-103(1): citizenship requirement for state benefit applicants.
• § 57-3-202(b): all shareholders of licensed distilleries must be U.S. citizens.
• § 57-3-210(d): no license to anyone convicted of a chapter 57 (or similar) offense within the prior 10 years.
• § 57-3-210(e): a distillery cannot have any interest in a wholesale or retail alcohol-licensed business.
• § 57-3-210(i): a distiller cannot employ convicted felons.

Annual renewal under §§ 57-3-213(a)-(c) requires the ABC to evaluate each distillery's continued qualification each year. That requires current ownership and officer information.

The Tennessee implied-powers doctrine (McFarland; Wayne County) anchors the analysis. The agency cannot exercise power outside the statute, but where a statute imposes substantive requirements that turn on factual information about the regulated entity, the agency necessarily has the implied power to demand that information.

The opinion does not draw a percentage threshold for change-of-control reporting because the General Assembly did not write one. The AG's answer leaves the ABC the practical responsibility to define a reasonable reporting form and cadence under § 57-3-104(c)(5).

Citations

• Tenn. Code Ann. § 57-3-104 (ABC enforcement); § 57-3-104(c)(5) (forms)
• Tenn. Code Ann. § 4-58-103(1)
• Tenn. Code Ann. § 57-3-202(b)
• Tenn. Code Ann. § 57-3-210(d), (e), (i)
• Tenn. Code Ann. §§ 57-3-213(a)-(c)
• McFarland v. Pemberton, 530 S.W.3d 76 (Tenn. 2017)
• Wayne County v. Tenn. Solid Waste Disposal Control Bd., 756 S.W.2d 274 (Tenn. Ct. App. 1988)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2018/op18-03.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
January 31, 2018

Opinion No. 18-03

Reporting Changes of Control of Corporations that Own and Operate Licensed Distilleries

Question 1
What statutory or other legal authority exists to authorize the Alcoholic Beverage Commission (the "ABC") to require the reporting of the names of the current corporate shareholders and officers of a distillery to the ABC on a form designated by the ABC?

Opinion 1
The ABC has the power, by necessary implication, to require distillers of alcoholic beverages to report the names of the current corporate shareholders and officers on a form designated by the ABC.

Question 2
Under current law, in the event of any change in the stock ownership of a corporation that operates a distillery, what percentage change of interest is required, if any, for the corporation to be required to report to the ABC the names of the corporate shareholders and officers of the distillery?

Opinion 2
For purposes of reporting to the ABC a change in the stock ownership of a corporation that operates a distillery, there is no provision of law that expressly establishes a specific threshold percentage change of interest that must be met before the change is required to be reported.

Question 3
Under current law, what provision exists, if any, to exempt any types of distilleries from reporting to the ABC the names of corporate shareholders and officers?

Opinion 3
There is no provision of current law that expressly exempts a distiller from such reporting requirements.

Question 4
If the answer to Question 3 is that there is such an exemption, does such exemption violate the Equal Protection Clause or other constitutional provision?

Opinion 4
See Opinion 3 above.

ANALYSIS

The ABC, as an agency of state government, is a creature of statute. McFarland v. Pemberton, 530 S.W.3d 76, 91 (Tenn. 2017). It therefore has only those powers that are expressly granted by statute or that arise by necessary implication to enable it to carry out its statutory mandate. Id. The source of any implied powers must still be found in the language of the statute itself. Wayne County v. Tenn. Solid Waste Disposal Control Bd., 756 S.W.2d 274, 282 (Tenn. Ct. App. 1988).

There is no statutory provision that expressly gives the ABC the authority to require corporations that own and operate a licensed distillery to report the names of their stockholders and officers. But the ABC has the authority by necessary implication arising from the powers and duties that have been expressly conferred on the agency by statute.

Tennessee Code Ann. § 57-3-104 gives the ABC the express power to enforce all of the provisions of chapter 3, title 57, including the statutory requirements for the issuance and renewal of distiller's licenses. Those requirements include, but are not limited to, the following: Tenn. Code Ann. § 4-58-103(1), which requires that each applicant for a state benefit be a citizen of the United States or lawfully present in the United States; Tenn. Code Ann. § 57-3-202(b), which requires all shareholders of licensed distilleries to also be citizens of the United States; Tenn. Code Ann. § 57-3-210(d), which provides that no distiller's license shall be issued to any person who, within 10 years preceding application has been convicted of any offense under Title 57 or other similar state or federal law; Tenn. Code Ann. § 57-3-210(e), which prohibits distilleries from having any interest in a wholesale or retail business that is licensed to sell alcoholic beverages, and Tenn. Code Ann. § 57-3-210(i), which prohibits distillers from employing convicted felons. In order to enforce each of these provisions, the ABC must know and, therefore, impliedly has the authority to obtain, the identity of these persons from the applicant/licensee.

A distiller must renew its license every 12 months by submitting a renewal application to the ABC. Tenn. Code Ann. §§ 57-3-213(a)-(c). Deciding whether an applicant is qualified for renewal of a license necessarily requires the ABC to determine whether the applicant still satisfies all of the statutory requirements for retaining the license. This statutory duty of the ABC, therefore, also implies the authority to request and obtain the identity of corporate shareholders and officers.

The ABC also has the express authority to "[p]rescribe all forms of applications and licenses and tax stamps, and of all reports and all other papers and documents required to be used under or in the enforcement of this chapter." Tenn. Code Ann. § 57-3-104(c)(5). This gives the ABC express authority to require reporting of ownership identity and changes in ownership interests on any form it prescribes for that purpose.

For purposes of reporting to the ABC a change in the stock ownership of a corporation that operates a distillery, there is no provision of law that expressly establishes a threshold percentage change of interest that must be met before the change is required to be reported.

Likewise, no provision of current state law exempts any type of distillery from reporting the names of corporate shareholders and officers to the ABC.

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

MICHAEL A. MEYER
Special Counsel

Requested by:
The Honorable Timothy Hill
State Representative
500 Cordell Hull Bldg.
Nashville, Tennessee 37243