Corporate sponsorship attracts the attention of for-profit businesses because sponsorship publicly recognizes the company`s association with a particular charitable cause, which can help businesses attract new customers or boost the company`s reputation due to the “halo effect” of the nonprofit`s goodwill. Nonprofits, in turn, receive financial support and may also receive increased media and public attention, in-kind benefits, and/or product donations. A financial sponsor is a not-for-profit organization that provides fiduciary oversight, financial management, and other administrative services to build capacity for charitable projects. Links to a sponsor`s website on a not-for-profit website may be considered advertising rather than use or acknowledgment in certain circumstances. For example, a link on the non-profit organization`s website to the sponsor`s website is considered a use or confirmation. On the other hand, a link to a sponsor`s website that includes a confirmation from the nonprofit organization is considered advertising. Sponsorship from the business world can be an effective way to build a nonprofit`s fundraising network and secure the funding needed to host large events. In turn, sponsors benefit from unique advertising opportunities and an increased perception of being community-focused. The backbone of an event sponsorship is the sponsorship agreement. The IRS does not consider the use or recognition of a sponsor`s name, logos, or product lines to be a material return benefit. In addition, the IRS allows nonprofits to recognize the following: The PTA should publicly recognize royalties or sponsorship.
The acknowledgement of receipt may include the name, logo, address, telephone number and products of the Company Sponsor. Confirm sponsorship of a specific event in the PTA report card or report card if school district guidelines allow. Note that business sponsorship can result in an unintentional tax liability, even for tax-exempt nonprofits. We recommend that you read the Council of Nonprofits` resources on the tax treatment of corporate sponsorship income so that you can distinguish between tax-free charitable contributions and a company`s payments to the nonprofit, which the IRS calls “independent business income.” Generally, a not-for-profit organization must pay an independent corporate income tax (“UBIT”) on all unrelated business income from its activities. Corporate sponsorship, also known as a “qualified sponsorship payment,” is an exception to UBIT that allows a nonprofit to receive untaxed payments from a for-profit corporate sponsor as long as there is no agreement or expectation of “significant consideration” for the sponsor. It is preferable to describe the responsibilities and obligations of both parties in a written agreement between the sponsor and the sponsored organization. An example can be found below. The agreement should stipulate that the tax sponsor is responsible for any compliance with legal requirements regarding the receipt, reporting and recognition of charitable donations. The agreement should also describe the administrative costs that the sponsored organization makes available to its tax sponsor, as well as any record-keeping obligations that the sponsored organization owes to the tax promoter.
Return benefits may take the form of advertising; goods, facilities, services or other privileges; the exclusive or non-exclusive rights to use the non-profit organization`s trademark or logo; or agreements with sole suppliers. An “exclusive supplier” agreement in which a not-for-profit organization agrees to sell or distribute only a sponsor`s products or services as part of a sponsored activity is considered a return service.³ In contrast, an “exclusive sponsorship” agreement in which a non-profit organization agrees to have a single sponsor and that sponsor is recognized as such: considered as an admissible recognition and not as a consideration. Corporate sponsorship agreements can vary in depth and formality, depending on the type of sponsorship and the relationship between the two organizations. It is recommended that a corporate sponsorship agreement include provisions that govern the following: When negotiating a sponsorship agreement, a not-for-profit organization may benefit from a clear idea of the value it offers in exchange for sponsorship. Companies that sponsor nonprofit events do so in the hope that their contribution to the event will result in significant value to the company. The sponsor realizes value through the regular and high-profile use of its name and logo, and through its association with a cause that is also a cause in its analysis that its customers want to support. Corporate sponsors expect their recipients to take steps to engage them in speeches, promotional materials and other activities related to the event. This also extends to the nonprofit`s social media accounts.
Many sponsors expect some degree of control over how their name and logo are used, with some insisting on full oversight of any communication that includes their name. A nonprofit must take these requirements seriously, including training staff to be sensitive to the sponsor`s expectations. Is your nonprofit ready to contact a corporate sponsor? Consider these “readiness factors” before contacting a corporate sponsor: The law allows a not-for-profit organization to receive tax-free business sponsorship income if the sponsorship is associated with a particular event that takes place once a year. .
