Underwriting Policy and Structure
Overview
Corporate sponsorships are an acceptable form of fundraising for MATV, but they must occur within certain regulations set by the IRS to remain tax-exempt.
The key concept to understand is “unrelated business income.” Any payments deemed unrelated business income are taxable. We must make all efforts to ensure that sponsorships do not trigger this distinction.
Qualification is highly dependent on the specifics of an individual arrangement, and its relation to the spirit of the regulations set forth by the IRS.
IRS Regulations
From the IRS regulations:
“Unrelated business income is the income from a trade or business regularly conducted by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function. Use by the organization, of the profits derived from this activity, does not, alone, make the activity substantially related to the performance by the organization of its exempt purpose or function.”
A key concept is what is “substantially related.” For example, we are already broadcasting meetings, so sponsorship of those meetings falls under this category. MATV opening up a lemonade stand does not.
Another key concept is that sponsors must not receive a “substantial return benefit” for their donation. This is why we are allowed to show their logo and acknowledge them as a sponsor, but we must not endorse or promote their business or products. The IRS defines this as the fair market value of the sponsor’s benefit not exceeding 2% of the payment.
To get a better understanding of these concepts, please take a look at the following resources.
“Plain English” discussion of corporate sponsorships:
https://www.adlercolvin.com/corporate-sponsorship-frequently-asked-questions-2/
A more in-depth discussion of “Revenue-Generating Activities of Charitable Organizations: Legal Issues”:
https://www.adlercolvin.com/revenue-generating-activities-of-charitable-organizations-legal-issues/
From the IRS – corporate sponsorships and advertising:
https://www.irs.gov/charities-non-profits/advertising-or-qualified-sponsorship-payments
A broader discussion of what constitutes “unrelated business income” including examples:
https://www.irs.gov/publications/p598
Additional regulations applied by Massachusetts
Mostly not relevant to our current fundraising efforts. They mostly apply to the situation where a charity partners with a corporation or external entity to solicit funds to the charity, and where that other entity makes material gain from the activity (e.g. the Red Sox have one game that is “MATV Night” where they solicit donations – in this situation they would have to register as a co-venturer with the state). It is worth noting that any unrelated business income that qualifies under federal rules is also subject to state tax. More on state-specific regulations here: https://labyrinthinc.com/massachusetts-fundraising-registration-requirements/
Procedure
Sponsorships shall be executed according to MATV policy. All agreements must include a written contract between MATV and the Sponsor that is in compliance with the MATV sponsorship agreement contract template.
Sponsorships must comply with the established structured offerings. Custom arrangements may be explored, but will need to be evaluated on a case-by-case basis for their compliance with regulations.
Please email info@miltonaccesstv.org to inquire about underwriting with MATV.