Published in Food/Agribusiness

Legislation aims to bring clarity around liquor licensees’ charitable giving

BY Sunday, April 24, 2022 06:29pm

Newly introduced state legislation aims to bring clarity to a legal gray area that has prevented some Michigan bars and breweries from using their businesses to fuel charitable giving.

State Sen. Curt VanderWall, R-Ludington, recently introduced Senate Bill 1004, which would allow state liquor license holders to donate a percentage of beverage sale profits to nonprofit charities while freely advertising these fundraisers.

“The way the bill is written right now, it makes it legal for a brewpub or bar that says, ‘We’re going to donate a dollar off of a beer.’ You can’t do that right now,” VanderWall told MiBiz. “They can (donate) off of their total sales, or the food part of their business, but they can’t use alcohol and say: ‘We brewed this special batch of beer and for every pint we sell, we’ll make a donation.’” 

Legal minefield

The legality of charitable giving for breweries, bars and other liquor license holders has long been muddied because of a provision in the state’s liquor control code that states “a licensee shall not allow a person whose name does not appear on the license to use or benefit from the license.”

This provision has made license holders skittish when it comes to linking donations directly to individual alcohol sales or combined sales of food and drink, worried they might be dinged for a violation.

As MiBiz reported at the time, the issue cropped up in 2019 when Chico, Calif.-based Sierra Nevada Brewing Co. sought to support victims of the catastrophic Camp Fire in northern California. The brewery created a special beer as a fundraiser, pledging to donate 100 percent of its profits from the sale of the product to the Camp Fire Relief Fund. 

Sierra Nevada shared the recipe online and encouraged breweries all over the country to participate, leading to 30 breweries in Michigan to hop on board. The effort caught the attention of the Michigan Liquor Control Commission (MLCC) as a potential violation.

Last year, the MLCC issued an interpretative statement on charitable giving to provide clarity for its licensees. In the document, the MLCC stated that “the commission does not view a licensee’s mere monetary contribution to an unlicensed nonprofit entity as allowing the unlicensed nonprofit entity to use or benefit from the license and will not pursue enforcement action against a licensee solely for making such a contribution.”

VanderWall’s bill would essentially codify the MLCC’s interpretation.

An MLCC spokesperson told MiBiz that the commission is reviewing the bill and has not yet taken a formal position on it. The bill has been referred to the Senate Committee on Regulatory Reform.

“Michigan laws have always been a little different when it comes to alcohol sales,” VanderWall said. “Everybody gets a little paranoid. Nobody wants to get in trouble or have a red check mark or flag put by their business name suggesting they skirted the law or did something on the edge.”

Under the MLCC’s current policy, licensees cannot donate alcohol to an unlicensed nonprofit to then sell. Licensees also cannot allow an unlicensed nonprofit to operate an event at the licensed establishment and accept the proceeds before they are recorded and properly taxed.

The new bill, in its current form, would not change that.

Greenlight to give

Brewers attested to navigating what can be a complicated legal system when it comes to their business and philanthropy.

“I definitely get plenty of people calling me asking what they’re allowed to do — especially because we have done a few programs,” said Scott Newman-Bale, CEO of Bellaire-based Short’s Brewing Co. “I’ve explained to them that the key is you have to make the money and donate it — you can’t bypass (the MLCC).”

“You can’t just have a donation pot where you take a case of beer, throw in the money and you take the pot and hand it to the charity. You need to take the sale, pay all the taxes due, record it in your books and pay,” Newman-Bale added. “That’s how it should be and that’s how this codification works. Hopefully it cleans it up, but there are definitely questions to be had.

One of those questions is whether licensees can follow this same procedure to benefit entities that aren’t a registered 501(c)(3) nonprofit organization.

“What happens if Johnny in the warehouse has cancer and you want to do a fundraiser for him?” Newman-Bale said. “Can you do that? I think there are still questions to be had, but I think we’re going in the right direction making sure we’re clear that we can be good community partners, which benefits everyone, including the state.”

Kris Spaulding, co-owner of Grand Rapids-based Brewery Vivant and pub brewery representative for the Brewers Association board of directors, said she had not yet reviewed the bill but agreed this is an area of the industry that requires some clarity.

Brewery Vivant, which Spaulding owns with her husband, Jason, is a certified B Corporation, a designation intended to show the company’s commitment to sustainability, accountability and transparency. Charitable giving is a component of that effort.

“I would love to see something happen to clear things up for license holders,” Spaulding said. “We continue to do fundraisers but have limited our verbiage to say ‘a portion of proceeds will be donated,’ which we’ve been told is safe language to use. There is real fear that if you say the wrong thing you could be fined by the MLCC, which is quite unfortunate when what you are trying to do is something good.”

VanderWall said breweries are known for their community focus, which is why it was important to untether them from legal red tape.

“They bring us back to the old-school atmosphere, where there was always a local pub that was super involved in the community and we want to give them every opportunity to remain as that business that continues to give back without the potential of running up against the law,” VanderWall said. 

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