The Internet has been a boon for nonprofit organizations. Charities hoping to raise awareness — and money — can now reach a worldwide audience with minimal expense. Just keep in mind that the same rules that apply to fundraising via traditional media apply to Internet fundraising.
Not all tax-exempt organizations can receive tax-deductible donations. The IRS requires all organizations that accept contributions online to clearly state on their web pages whether donations are tax deductible. The same information should also appear on electronically generated receipts.
If you pay professional fundraisers or other private parties for their help with Internet fundraising, the fees must be reasonable and consistent with your 501(c)(3) status. They must not be excessive and cannot provide direct or indirect private benefit or private inurement.*
QUID PRO QUO CONTRIBUTIONS
When a donor contributes and receives something of value (goods or services) in return, it’s called a quid pro quo contribution. To avoid violating the rules against private benefit or private inurement, your charity generally must acknowledge quid pro quo contributions by providing an estimate of the fair market value of the goods or services received and a statement that only the portion of the donation in excess of that value is deductible.
LOGOS AND LINKS
Linking to your sponsors’ or donors’ websites or displaying their names, logos, or products on your website in return for their support could be construed as selling advertising and could generate unrelated business taxable income (UBTI). Online merchandise sales could also generate UBTI.
NOT YET TAX EXEMPT?
If your group is in the process of applying for 501(c)(3) status but hasn’t yet been recognized as tax exempt, you must state in a clear and conspicuous manner on your donation web page that contributions may not be tax deductible. You also must include information about actual and planned fundraising activities and expenses — including your online efforts — on your group’s application and on its annual Form 990 information return.
* The private inurement and private benefit rules ensure that the organization’s charitable assets are preserved for the benefit of the public and not diverted to benefit a person closely related to the organization, particularly one who exercises a significant degree of influence over it.
Original content provided by: Client Line Newsletter