Donations of Cannabis: Legal Requirements Versus Limitations
Should nonprofits accept donations from charitable cannabis companies? Or should generous businesses find a way to bypass the challenges of donating legitimate profits and products to provide help wherever it’s needed most?
Plenty of cannabis charity organizations exist, and some are more established than others. But what about the cannabis brands just beginning to earn that want to give back?
Hard work and capital compose the foundation of nearly any business in the cannabis industry. Between cultivators, dispensaries, extractions, testing labs, and distributions, the industry is full of hard-working people investing time and money to achieve success.
Naturally, once the money begins rolling in, many leaders operating businesses operating with California cannabis compliance in mind want to give back, specifically to nonprofits.
Let’s talk about the challenges of donating and some ways you can bypass those limitations.
Donating as a Cannabis Company Can Be Challenging
Unfortunately, with cannabis still federally classified in the same category as heroin (Schedule I drugs), the cultural stigma can have an impact on whether or not a nonprofit is willing to accept a dispensary donation. This is regardless of whether the donation is cannabis or cash.
Organa Brands’ Experience
Driessen commented, “It felt like a slap in the face.” He explains, “Because the message was essentially you’re a drug dealer.”
Even if nonprofits were willing to take donations from cannabis businesses, they’d request it be anonymous. The cultural stigma was too much for some charities. However, some charities were willing to receive donations from cannabis businesses.
Denver Rescue Mission works with the homeless. This nonprofit was happy to receive charitable donations from Organa publicly. The nonprofit even accepted volunteered staff-hours 29 people from Organa.
Bloom Farms Donates Time & Meals
Bloom Farms is a California-based organization selling cannabis oils and vape pens. This charitable cannabis business has donated over two million meals and pledges to donate a meal to a food-insecure family every time someone purchases one of its products.
But Bloom Farms doesn’t stop there; the company donates to and volunteers with several food banks across San Francisco and Marin, Alameda County, Sacramento, and El Dorado.
As you can see, even though this company operates within the cannabis industry. However, even with the cultural stigma in place, it connected with food banks and created its own program to give back.
Miller Rail Farms Donation Towards Education
Another example is when Miller Rail Farms donated to a Calaveras County elementary school in California. Before donating, they had to give the funds to another nonprofit organization. Once this donation was made, the nonprofit organization donated to the school.
Despite the money being used to re-open the pre-school and music programs, the school would not accept the donation directly from the cannabis company. Instead, the gifted profits had to go to another nonprofit first. This is because the stigma associated with the cannabis industry makes it inappropriate for the school to accept the donation directly.
While the cultural stigma impacts how some nonprofits view donations of cannabis profits, tax issues also pose a severe problem.
Cannabis Donations Could Cause Tax Issues for Nonprofits
Regardless of the stigma, a nonprofit that has a 501(c)(3) filing status can lose this status if it takes money from cannabis-related endeavors.
Federal funding might be what’s keeping the nonprofit in operation. So it’s not realistic for these organizations to accept funding from organizations within the cannabis industry.
Even with this being the case, there’s a work-around cannabis companies can use to give to these organizations.
Instead of donating cash or cannabis, charitable cannabis businesses can offer labor. These cannabusinesses can send their team members to volunteer for nonprofits.
This has also helped to offset the idea that stoners are lazy!
Cannabis companies can partner with local organizations to improve their community, as well. This helps them to establish long-term relationships and share one another’s platforms to announce community projects and reach more people.
Even if you want to help a nonprofit, providing volunteer staff or partnering on local projects might be beyond your capabilities. This is when starting your own cannabis charity could become a viable option.
Donating by Starting a Cannabis Charity
Some dispensaries opt to start a nonprofit organization. While they don’t have access to federal funding or the tax-exemption that comes with a 501(c)(3) status, self-funding, running lean, and finding volunteers can contribute to the nonprofit’s success.
Some companies give back to communities by providing free meals to the homeless. Others provide school supplies. There are even cannabis businesses that create nonprofits focused on cannabis-specific causes.
One example, the Association of Cannabis Specialists (ACS), helps the cannabis community by safeguarding patient care with clinical best practices while working with other stakeholders in the community.
Evidence- and experience-based education are made accessible through this nonprofit. In turn, ACS is helping patients, cannabis clinicians, referring clinicians, and lawmakers understand the plant and make informed decisions. This nonprofit funds its efforts with corporate and individual donors.
Another example is Green Soul Foundation (GSF). GSF helps vulnerable demographics, including veterans and low-income patients.
This nonprofit helps disadvantaged populations reconnect with economic opportunity by taking barriers away and offering workforce development. With a $1 million investment from MedMen, GSF works towards restoring economic mobility within traditionally vulnerable communities.
Donations of Cannabis Protected With SB 34
Now that the Cannabis Compassion bill is in place, nonprofits no longer have to worry about the taxation Prop. 64 required on donations. In the past, every pound of cannabis donated free to legal patients demanded almost $1,000 in state taxes.
The Dennis Peron & Brownie Mary Cannabis Compassion bill was passed through the California legislature on September 21st, 2019. Governor Newsom signed the Cannabis Compassion bill into law on October 13th, 2019.
Even though some donations still require some workaround, dispensaries can now make compassionate donations of cannabis to patients without the fear of heavy taxation.
The legislative future for cannabis donations is progressing, and with this change, the cultural stigma of this industry will eventually fade. As time progresses, we expect to see positive changes in the way nonprofits receive donations from charitable cannabis companies celebrating the growth of this budding industry.