In September 2018 new rules for several license types issued by the Iowa Alcoholic Beverages Division came into effect. As of this date, holders or applicants for certain types of wine permits have been required to post a surety bond when applying to get licensed with the Division.

Previously, a surety bond requirement only applied to certain types of beer permits, whereas now it also includes 2 types of wine permits. This change was introduced by rule ARC 3928C which was first published in early June, before being adopted in September.

Keep reading for an overview of the new wine permit bond requirement in Iowa.

Rule ARC 3928C Changes to Iowa Administrative Code

The provisions introduced by rule ARC 3928C amend Chapter 4 "Liquor Licenses — Beer Permits — Wine Permits" and 5 "License and Permit Division", and rescind Chapter 12 of the Alcoholic Beverages Division Rule [185]. The main amendments introduced to this chapter by the rule concern the requirements for applying for various wine and beer permits in the state.

In particular, under the new rules, applicants for a Class "A" wine permit must post a $5,000 surety bond when applying for a permit. Similarly, applicants for a wine direct shipper permit must also post a bond in this amount. The latter are exempted from the bond requirement if they have already posted such a bond as part of applying for a Class "A" permit.

Who Must Comply With the Rule?

As of the effective date of the rule, September 5, 2018, applicants for those permits have been required to comply with the new bond requirements. Similarly, those renewing their permit at any time after September must also comply with the requirements.

Holders of such permits who were licensed at the time of the rule coming into force who have not yet had to renew their permits do not need to obtain a bond until the time of their renewal.

Why Do Bond Permit Holders Need to Get Bonded?

This type of bond is called a license bond - i.e. it is required when someone applies for a permit or license to conduct a certain type of business. Every bond has different conditions with which the bonded party, the bond principal, must comply.

The Iowa wine permit bond is conditioned upon permit holders' compliance with the provisions of the Iowa Code, and in particular those of the Alcoholic Beverage Control Act and the rules mentioned above. If a permit holder violates any of these provisions, causing losses, damages or other injuries to anyone, a claim can be filed against their bond. Bond claims are the mechanism for any harmed parties to receive compensation for their losses.

When a bond claim is made, the surety may at first compensate claimants (if their claim is legitimate) for as much as the full amount of the bond. Afterward, the bonded party must reimburse the surety. This is a standard condition of all bond agreements. In other words, the bond is a form of guarantee and protection for the public and the state. But it is also a successful way of ensuring that licensed parties conduct business in accordance with their legal obligations and responsibilities.

What is The Cost of a Bond?

First-time applicants usually wonder if the bond amount ($5,000) is the same as the cost of getting bonded. No, the bond amount is the total amount of compensation that needs to be available to possible claimants against the bond.

The bond cost, or premium, is equal to only a small fraction of this total amount and is usually determined by sureties on the basis of several criteria. The most important among these is an applicant's personal credit score. The higher the credit score, the cheaper it will usually be to obtain a bond

Thoughts on the New Bond Requirement

What do you think about the new requirements? Is this bond necessary for wine permit holders or not? Leave us a comment below, we would like to know your thoughts!

Todd Bryant is the president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping business owners get bonded and start their business.