Corporate donors often provide much-needed funding to support the activities of nonprofit organizations. Funding that is contingent on the donor receiving some sort of public recognition in return is called a sponsorship. The IRS has guidelines on what a 501c3 organization can do to recognize a corporate sponsor.
If an organization stays within those guidelines and merely thanks a sponsor by publicly acknowledging or identifying it, then sponsorship payments will not be taxable. On the other hand, if an organization regularly promotes a sponsor or its products, that may be considered advertising and may cause the organization to be taxed on the sponsor’s payment.
This new legal alert includes guidance to help prevent your organization from inadvertently crossing this line and losing a large chunk of its sponsorship dollars to tax.
Read the entire article by clicking here.Article: Do's and Don'ts of Corporate Sponsorship