Giving Green – Can Cannabis and Social Responsibility Coexist?
Should Colorado nonprofits take contributions from cannabis companies?
According to the Colorado Nonprofit Association’s 2016 year-end survey, only 6 percent of nonprofits polled had accepted contributions from cannabis companies — but two-thirds of those organizations said they’d consider accepting a donation in 2017.
“It’s a time of shifting norms,” says Renny Fagan, CEO of the Colorado Nonprofit Association. As the billion-dollar marijuana industry matures into a mainstream enterprise, cannabis business owners are showing Colorado they’re interested in social responsibility, too.
And Colorado’s nonprofits could use the cash. The state is home to more than 20,000 public charities, all competing for limited funds. So why aren’t nonprofits jumping at the opportunity to go green?
There’s one bright-line rule to consider first: “If a nonprofit receives federal funds through a contract or grant, that contract or grant probably prohibits a violation of federal law as a condition of receiving funds,” Fagan says, noting that federally funded nonprofits should not accept marijuana money.
But plenty of nonprofits don’t run on federal dollars — and for these organizations, the decision to accept pot company donations requires a multifaceted assessment.
“If you take this money, there are two vulnerabilities,” says attorney Tom Downey, shareholder at Ireland Stapleton. He points first to criminal law, which you’re technically violating if you promote a marijuana retailer, by aiding and abetting in the commission of a crime. On the civil side, nonprofits have a license – a 501(c)(3) – giving them authority to treat money differently than a corporation. That status can be revoked for a number of reasons —including committing a federal crime.
Don’t panic yet.
As Downey puts it, “The legal line never ends, but the enforcement line is drawn wherever the enforcer chooses to draw it.”
The federal government has followed a policy of non-enforcement for the past eight years, stating clearly that it won’t enforce federal marijuana laws against nonprofits as long as the nonprofits are complying with state marijuana laws.
A policy isn’t law, though, and it can be changed anytime. “We think this will be the same under the current administration, but of course there is no certainty,” Downey says, adding that the risks of criminal prosecution and 501(c)(3) revocation are “pretty remote.”
The analysis for nonprofits that aren’t federally funded, then, is wrapped up in mission. “It really comes down to how a gift fits with their donor base overall, and is it consistent with their mission,” Fagan says.
Nonprofits avoid situations that could reduce their impact. If your organization were to take a gift from a cannabis company, would the public raise a brow?
Kaya Cannabis – founded as Southwest Alternative Care in 2009 – launched its Grow It Forward giving program earlier this year. Grow It Forward aids charities in three broad categories but doesn’t work with organizations for children. “As much as we love local schools, I don’t ever want to be perceived as marketing to that constituency,” says Kaya’s CEO, Amanda Gonzalez.
Kaya gives instead to nonprofits focused on civic engagement, the environment and health care — the latter of which might be a natural fit when it comes to mission alignment. “This is a drug we know has at least some medical benefit,” Gonzales says. Says Fagan,“The nonprofits I’ve heard from that think favorably about contributions from [cannabis companies] are those engaging with populations working through chronic pain.”
Good Chemistry, for example, partners with One Colorado, sponsoring signature fundraising events such as The Ally Awards and Pink Party. “They’ve been one of our top partners,” says Daniel Ramos, executive director at One Colorado, noting that the partnership has been successful because Good Chemistry CEO Matthew Huron has had strong personal ties to the LGBTQ community since 1996, when his father and his father’s partner were diagnosed with HIV.
“He came to cannabis as a way to help his fathers manage their pain,” Ramos says. “Cannabis is used by multiple sclerosis patients as a symptom management product,” adds Jules Kelty, director of development at the Rocky Mountain MS Center.
When the Rocky Mountain MS Center decided to seek contributions from a marijuana retailer, it was largely in response to patients who were asking about medical marijuana. The Center worked with Downey’s firm, Ireland Stapleton, crafting an official gift acceptance policy over an 18-month period.
One caveat: “We only accept contributions from cannabis companies that do medical marijuana,” Kelty says.
“People thought money would flow in as soon as we decided to accept it,” he adds. “But I’ve noticed that – just like working with any other industry – it takes time to build relationships.”
Some cannabis companies are “still formalizing their philanthropic giving programs,” Kelty says. While the marijuana industry was worth $2.7 billion in 2014, according to The ArcView Group, many cannabis companies might not have the wherewithal to give yet.
“I think most of us want to give back to the community, but the cannabis business is really tough,” Gonzalez says.
“There’s a tax regulation that says if your business is illegal drugs, then you can’t write off the cost of doing business,” she says, adding, “I can’t take any deductions for anything that has to do with selling cannabis.” That’s a huge barrier to giving back. “Until [Internal Revenue Code] Section 280E changes, we just don’t have as much income as we should.”
Between toy drives and seasonal donations, Kaya had been giving back since its inception, but in an ad hoc way. In 2016, Gonzalez, with a background in law and nonprofit work, attempted to institute a formalized program.
Gonzalez reached out to a handful of breast cancer organizations and was turned down. “I had a couple of people say they’d accept a personal check from Amanda Gonzalez. I didn’t want to do that anymore,” Gonzalez says, adding, “It’s important for me for the public to see cannabis giving back.”
Gonzalez blasted out a Google form to her network, and about 30 Denver- and Boulder-area nonprofits expressed interest in accepting contributions from Kaya. Gonzalez still has to work to give money away, though.
For some organizations, cannabis money is too complicated. Children’s Hospital Colorado Foundation has a policy against accepting cannabis donations. In a statement, the Foundation explains, “While the industry has been legalized in our state, it is still against federal law. This fact currently precludes banks from handling funds generated by this industry, thus making it difficult for nonprofits to effectively interface with these entities.”
Other nonprofits worry about their other donors. Are you going to lose $5,000 from a loyal donor to take a $500 gift from a cannabis company?
"We went directly to our most loyal donors and supporters to ask how they felt about it, and if it would change their giving,” Kelty says, adding, “Everyone was fine with it.”
Once you’ve determined that your organization can accept a gift from a cannabis company, the last step is figuring out how you’ll take the gift. “There’s a scale from most vulnerable to least vulnerable,” Downey says. If you’re taking a whole bunch of money in cash and plan to put the company’s name on the side of your building, “You’re setting yourself up,” Downey says, reminding nonprofits that they need to do proper vetting before accepting any gift.
Do a Google search on your perspective donor; make sure the company is a legal, legitimate operation that’s in good standing with the state and maintains a current license with the Colorado Department of Revenue. “Also, consider how you’ll support your donor,” Downey says.
While some nonprofits are wary of openly supporting a cannabis sponsor, the Rocky Mountain MS Center provides “full sponsorship benefits to anyone who gives funds,” Kelty says, adding, “We treat cannabis partners like we would any other business.” While some nonprofits are accepting cannabis funds without acknowledging where they came from, Kelty says, “We try to be equitable and respectful when working with the cannabis industry.”