Is your bar, brewery, winery or distillery helping out by soliciting for a charity in Illinois? First – Great Job! Also, be advised – there are statutes and regulations that govern that and you need to follow them.
I want to quickly clear up a misconception that alcohol retailers, and brewers, distillers, and wineries in Illinois may have about running promotions and undertaking solicitations for charities have no statutes to comply with. In Illinois, they do – there’s the Illinois Charitable Trust Act, and there are also rules published by the Illinois Attorney General’s office and regulations of the Illinois Liquor Control Commission to consider when helping others by using your business as a platform for good.
So, YES, there are laws about it. It is not simply a regulatory fiat. I recently read an article by a group of attorneys, apparently sparked by the New York State Liquor Authority’s decision that breweries and distilleries running charitable donation programs advertised as “X%” of every beer/cocktail/bottle etc., sold would go to a charity was improper as the NY State Liquor Authority considered such acts as the charity “availing” itself of the licensee’s liquor license and “availing” is prohibited by NY liquor law. In the article it was stated that Illinois has no law about the issue and that concept in Illinois is simply the creature of regulatory fiat created under rules by the Attorney General.
That’s not true. Like any state, Illinois has a regulatory process whereby agencies create rules to shed light on and further help people in understanding statutes. I’m guessing the research on the fly wasn’t terribly thorough, because someone apparently reviewed the Illinois Attorney General’s website and found the charitable trust rules but didn’t think back to first principles from law school (rules/regs need to be tied to statutes) and do a little more digging upon wondering how there could be a rule or a reg that wasn’t tied to a statute.
We did a piece on donating to charities and the requirements surrounding them (these are generally called commercial co-venturer laws) back in 2014.
The article generally put forth some principles and things to watch out for noting that every state was different:
The key points to each state’s requirements are tricky, but some important pitfalls to watch out for:
- Some states require the commercial co-venturer and charitable organization to have a written contract with mandated terms and many states require that parties file the contract with the appropriate state agency.
- Most state laws explicitly require written advertisement disclosures including information on the per-unit donation amount of any goods sold, or require a statement of the gross proceeds or other remuneration that the charity is going to get.
- Many states have reporting mandates that call for annual filings with detailed information on the monies raised, disbursed and what the commercial half of the venture kept.
- There are states that require the parties to post a bond guaranteeing performance and delivery of the monies that get raised.
So what are some helpful tips for making sure that you’re doing good the state-sanctioned way:
- Have a written agreement that complies with the laws of each state where you’re running the promotion/charitable effort.
- Check the state statute to see if you need to get a bond, whether you can state the donation amounts in terms of per-unit donations, whether you need to disclose a maximum donation amount, and if it’s too onerous, check to see if a less onerous alternative might be had by just making a flat donation.
- Make sure you have all the required disclosures for commercial co-venturer information.
- Don’t equivocate in the advertising, make sure nothing is misleading or confusing about the terms of the donation.
- Have accounting and inventory tracking systems that can accurately keep records about the relevant sales and maintain a proper accounting.
What that article didn’t do was get Illinois specific in reviewing issues that bars, restaurants, craft breweries, craft distilleries and wineries need to understand about running these promotions in Illinois.
For starters, if you’re advertising that you’re raising money for a charity, is it registered? Have you checked the 501(c)(3) or other exempt status? If not, it may just be an organization you’re raising money for and tax implications could be different (talk to an accountant).
Next, are you raising or holding more than $4k at any time? If so, the Charitable Trust Act kicks in and rules concerning charitable donations and solicitations may be triggered and in addition to being a “trustee” of the funds you are receiving, you could be required to report the funds you’ve raised and register yourself.
Also, outside the statutory requirements regarding charitable donations, there are false and misleading advertising and consumer statutes to consider – for instance, is there a cap to your donations that you’ve not informed people about? Is there an administrative or other fee that you will be applying? Are you donating pre-tax or post-tax? Profits? Gross? Many issues can arise that a failure to disclose can make you liable for so carefully consider how and what you are donating before you advertise it.
These details aren’t exhaustive and they apply in different ways depending on what you’re doing, so going to the source material we’ve linked is important as you could have other requirements or issues based on the particulars of your charitable campaign.
Finally, the Illinois administrative code has a few guidelines governing alcohol donations and charitable interactions and utilizing space between manufacturers and retailers for events that you need to be aware of:
Industry Member Promotional Events at Retailer Locations. Any promotional event sponsored by an industry member at a retailer’s premises that primarily promotes the retailer’s business and does not promote, or only incidentally promotes,the industry member’s brand or brands of products violates the “of value” provisions of Section 6-5 of the Act. Industry member promotional events held at retailer premises must focus on the industry member or brands being promoted and all reference to the retailer in any advertisement shall be limited to the name and address of the retailer, which shall be relatively inconspicuous in relation to the advertisement as a whole. Promotional events include, but are not limited to, tastings, samplings, bottle signings, public product launch events,or other similar methods of brand promotion. The promotions shall be available to all similarly situated retailers without a purchase requirement imposed upon a retailer.
Product Donations. An industry member may make contributions of cash, alcoholic liquor products, non-alcoholic products, services, equipment or signs to a not-for-profit organization, including but not limited to charitable organizations, religious organizations, trade associations, political organizations, and fraternal organizations. An industry member may not make contributions of alcoholic liquor products to any not-for-profit organization that has a local municipal and State of Illinois retail license. These donations shall be subject to the following conditions:
- Donations of alcoholic liquor products may not be given for commercial purposes. The proof of donative intent is on the industry member;
- An industry member must maintain invoices on its licensed premises for a period of three years for all alcoholic liquor products donated to not-for-profit organizations;
- Signage dollar limitations contained in Section 6-6 of the Act do not apply to signage and advertising materials donated to a not-for-profit organization; and
- Advertising and signage referencing the industry member must be reasonably commensurate with a donative intent to ensure that the charitable donation is not being made for a commercial purpose, in violation of Section 100.280. The proof of donative intent is on the industry member.
Understanding these issues and properly and honestly running a charitable campaign is important and states have a vested interest in ensuring those recipients of charitable funds are protected – which is why they have statutes – and Illinois is no exception.
Another issues we’ve seen arise that you should be aware of when it relates to raising money for a charity – Auctions of liquor in Illinois:
As a retailer or a brewer, winery or distillery or wholesaler, you cannot auction rare or special alcohol to raise money for a cause or charity. One simple way to deal with wanting to get top dollar for a beverage so you can donate funds is to set a high price for all your bottles/cans/kegs of that particular alcoholic beverage on that date/time (make sure you comply with pricing rules and regs) selling them all at the mark-up in such a fashion as to raise money for the charity/cause. Yes, you might miss out on a super-top dollar bidding war, but you won’t violate auction rules which the state ILCC is in charge of through auction licenses:
(235 ILCS 5/1-3.32)
Sec. 1-3.32. “Auction liquor license” means a person who obtains prior written approval from the State Commission to sell or offer for sale at auction, on a specified date, wine or spirits for private use or consumption, or for resale by an Illinois liquor licensee in accordance with the provisions of this Act.
(Source: P.A. 88-91.)
Understanding there are issues to comply with is a great start to running a good charitable campaign. Thanks for helping out.