What Residency and Citizenship Rules Apply to TABC Applicants

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The text of the Alcoholic Beverage Code still says an applicant should be a United States citizen who has been a Texas citizen for the year before applying, and that a corporate applicant should be incorporated in Texas with a majority of its stock held by qualified residents. Federal courts have held the Code’s durational residency and citizenship requirements unconstitutional, and the State told a federal court it would not enforce the citizenship rule. What still applies is narrower: a non-citizen who lives in Texas lawfully is treated as a citizen, and the licensed business itself must be located in Texas.

What the Code’s text says

Provision Applies to What the text requires
<a href="https://statutes.capitol.texas.gov/Docs/AL/htm/AL.11.htm">Section 11.46(a)(11)</a> permits a ground to deny if the applicant is not a U.S. citizen or has not been a Texas citizen for one year before filing
<a href="https://statutes.capitol.texas.gov/Docs/AL/htm/AL.61.htm">Section 61.42(a)(5)</a> beer distributor and retailer licenses the same citizenship condition, as a mandatory ground for denial
Section 61.42(a)(8) corporate license applicants incorporation in Texas, and at least 51 percent of the stock owned by persons qualified to hold a license
<a href="https://statutes.capitol.texas.gov/Docs/AL/htm/AL.109.htm">Section 109.53</a> permits one year of Texas citizenship; for a corporation, Texas incorporation and at least 51 percent of the stock owned by citizens who have lived in Texas for a year; partnerships made up wholly of qualified citizens

Read alone, these sections would let TABC turn away an out-of-state owner, a recent arrival, or a company formed elsewhere, and would require it to do so for the beer licenses.

What the courts have held

In Cooper v. McBeath, decided in January 1994, the U.S. Court of Appeals for the Fifth Circuit reviewed the Code’s residency requirement. While the case was pending, the Legislature replaced the three-year requirement with the one-year version still in the text; the court held that the change did not make the case moot. It then held that the Code’s durational residency and citizenship requirements amount to economic protectionism that violates the Commerce Clause, and that the Twenty-first Amendment does not save them.

The Fifth Circuit’s 2010 opinion in Wine Country Gift Baskets.com v. Steen describes what followed. A 2007 federal district court decision, Southern Wine & Spirits of Texas v. Steen, held the requirements unconstitutional as applied to wholesalers, and the district court in the Wine Country litigation held them unconstitutional as applied to retailers. The State did not appeal that part of the judgment and advised the district court that it would not enforce the citizenship rule.

What still applies

  • Lawful residents. Section 1.07 treats an individual who is not a U.S. citizen but lives in Texas legally as both a U.S. citizen and a Texas citizen for any provision requiring citizenship, including the stock and partnership percentages.
  • A Texas location. The same 2010 opinion distinguished the owners’ residence, which Cooper addressed, from the physical location of the business, which it called a critical part of the three-tier system. A retail permit is still issued for premises in Texas.
  • Background checks for people who have lived elsewhere. The Personal History Sheet asks anyone who has not lived in Texas in the past year for an official criminal background check from the FBI or the state police where they lived.
  • The Texas incorporation clause. Cooper and the Steen decisions addressed residency and citizenship. The separate text requiring a corporate applicant to be incorporated in Texas remains in the Code, so a company formed in another state should confirm with TABC how that clause will be applied to it before filing.

Reading the rules for a real application

  1. Under Cooper and the Steen decisions, residence alone should not disqualify an owner living outside Texas; the owner’s personal history and the business’s Texas premises are what the application tests.
  2. A lawful permanent resident living in Texas is treated as a citizen under Section 1.07.
  3. A company formed outside Texas should resolve the incorporation question before the application is filed, not after TABC raises it.
  4. Every officer and majority owner still completes a Personal History Sheet, wherever they live.

This article is general information about Texas alcoholic beverage law, not legal advice, and reading it does not create an attorney-client relationship. Statutes and TABC rules change; confirm current requirements with the Texas Alcoholic Beverage Commission, the relevant city or county, or a licensed Texas attorney before acting.

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