AB 1267 – Allows Nonprofits To Engage In Commercial Co-Ventures With Alcoholic Beverage Distributors Or Sellers

CATEGORY: Nonprofit News, Private Education Matters
CLIENT TYPE: Nonprofit, Private Education
DATE: Oct 29, 2021

A commercial co-venture is a fundraising tool where a nonprofit engages with a for-profit entity to raise funds for the nonprofit through the sale and promotion of commercial goods and services.  Under the California Alcohol Beverage and Control Act, an ABC licensee (e.g., a distributor or seller of alcoholic beverages) is prohibited from giving a premium, gift, or free goods in connection with the sale and distribution of any alcoholic beverage.  The Department of Alcohol Beverage Control had taken the position that this prohibition under the ABC Act makes it unlawful for an ABC licensee to advertise that a portion of the purchase price of an alcoholic beverage will be donated to a specific nonprofit.  As a result, nonprofits have been unable to engage in commercial co-ventures with for-profit entities that sell or distribute alcoholic beverages.  AB 1267 removes this barrier, at least until December 31, 2025, when the bill is set to sunset, unless extended by the Legislature.

AB 1267 authorizes certain manufacturers, distributors, or sellers of alcoholic beverages to donate a portion of the purchase price of an alcoholic beverage to a nonprofit charitable organization in connection with the sale or distribution of an alcohol beverage.  The co-venture agreement with the nonprofit must abide by the following limitations: (1) the donation must relate to the sale of sealed alcohol beverages; (2) the promotion or advertisement of the donation shall not directly encourage or reference the consumption of alcoholic beverages; and (3) a donation shall not benefit a retail ABC licensee or benefit a nonprofit charitable organization established for the specific purpose of benefiting the employees of retail ABC licensees and the advertisement or promotion of a donation shall not, directly or indirectly, advertise, promote or reference any retail licensee.

Nonprofit schools and educational institutions that are interested in potentially taking advantage of this new exception and are exploring entering into a commercial co-venture agreement, should consult with legal counsel to advise as to whether the planned co-venture agreement complies with the requirements of AB 1267.  Schools should also first determine whether such a co-venture agreement with an ABC licensee is consistent with the school’s values and any Gift Acceptance Policy adopted by the governing body.

(AB 1267 amends Section 25600 of the Business and Professions Code.)

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