Q: I wanted to touch base with you or one of your colleagues regarding our interest in pursuing outside organizations to submit either sponsorships and get recognition in our catalog or purchase an ad. What is the difference and the associated ramifications?
A: Thank you for your question. The IRS and the US Postal Service have strict guidelines about advertisements in publications mailed using a non-profit bulk rate. If, however, you receive donations and list your donors, that is acceptable.
The issue of sponsorships is more complicated, and typically, the IRS applies the quid pro quo rule to sponsorships exceeding a certain amount. In addition, some sponsorships, depending upon their nature and the amount of income, would need to be considered non-related business income. This moves us into a legal area where LERN is not qualified to give an answer. For questions about sponsorships and your liability, I would recommend that you contact the IRS for a definitive answer, based on the sponsorships you are considering.
Certain types of advertising is also prohibited in non-profit mail, and you should clarify those rules with the IRS as well. Thanks for asking. Please let me know if I can help further.