Non-Profit Question

[deacfan78]

Trying to find some info to help a small 501 (c) (6) organization attempt to get some sponsors to help offset some costs with their annual conference. I have reached out to their accountant, but the accountant keeps putting it on the back burner.

What I found online from my research is any sponsorship funds would not be tax deductible and the organization has to disclose that information up front.

Other than that, I can't find much else as far as rules and regulations go for accepting sponsorship money. Anyone here have or had any experience with that?

PH - do you have any insight? I was told you know all. Also, fuck laron profit! My mom is dead...thanks! Just kidding, my mom is alive and well.

 

[deacdiggler]

I don't but section 170 is the provision that provides for charitable deductions. See 170(c)(2)(B) for the purposes that qualify. The entity itself might be tax exempt but that doesn't mean that someone who contributes to it gets a deduction.

Put another way: if I earn $1000 and donate it to charity, no one ever pays tax on that $1000. If I donate it to a 501(c)(6), I pay tax on the $1000 but the organization doesn't have to pay tax on receiving it.

 

[Wakelaw2006]

(c)(6)s are generally trade associations, business leagues, chambers of commerce, etc. You are correct that contributions to a (c)(6) are not tax deductible in the same way that contributions to a (c)(3) are tax deductible. The typical disclosure for contributions to political campaigns not being deductible should work (e.g., Contributions or gifts to Hagan for U.S. Senate, Inc. are not tax deductible). The sponsors may be able to deduct the contributions as business expenses - that would be something for their accountants to deal with though, not your (c)(6). On the (c)(6) organization's side, if the only benefit the sponsoring organization receives is the use or acknowledgment of its business name, logo, or product lines in connection with conference, the payment should be a "qualified sponsorship," and should not subject the (c)(6) to unrelated business tax. There really aren't any other rules I can think of from a federal tax perspective.

Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein

 

[deacdiggler]

Lol at the circular 230 disclosure. How did I miss that?

 

[deacfan78]

(c)(6)s are generally trade associations, business leagues, chambers of commerce, etc. You are correct that contributions to a (c)(6) are not tax deductible in the same way that contributions to a (c)(3) are tax deductible. The typical disclosure for contributions to political campaigns not being deductible should work (e.g., Contributions or gifts to Hagan for U.S. Senate, Inc. are not tax deductible). The sponsors may be able to deduct the contributions as business expenses - that would be something for their accountants to deal with though, not your (c)(6). On the (c)(6) organization's side, if the only benefit the sponsoring organization receives is the use or acknowledgment of its business name, logo, or product lines in connection with conference, the payment should be a "qualified sponsorship," and should not subject the (c)(6) to unrelated business tax. There really aren't any other rules I can think of from a federal tax perspective.

Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein

So we would need to put a line at the bottom of the letter/forms stating "contributions or gifts to XYZ Association are not tax deductible". I did read that sponsorship funds should be able to be written off by a business as advertising, but nothing for individuals. I also read that income to the (c)(6) must come from memberships or other income that relates to the agenda of the organization. So, I would assume that since they are asking for corporate sponsors for their annual conference, they would be fine.

Excellent. I just wanted to make sure that what I read, I interpreted correctly. It sounds like I did.

 

[TwentyONE]

This is what our (c)(6) arm puts at the bottom of sponsorship contracts:

Sponsorships with **** are not
tax deductible as charitable
contributions. However, they may
be tax deductible as ordinary and
necessary business expenses.