Non-profit organizations are reminded that the same rules and regulations that applied with regard to solicitation, lobbying, advertising and unrelated business income before the internet and e-commerce age, still apply today.

Form 990 and various state filing forms for non-profits are now requiring non-profits to list their web site addresses. This allows the IRS and a states attorney general to easily monitor a non-profits web site for unrelated business income, tax and solicitation issues. Here are some of the issues that may be problem areas:

1.

Revenue sources – if the website for your organization references or has present indications of non charitable revenue sources, these may be scrutinized. Examples include rental of facilities (even if for a nominal charge), advertising, referral fees, sale of products, etc. Remember – the activity must contribute to the organizations accomplishment of its exempt purposes, based upon all of the facts and circumstances in order to be exempt income. The fact that income from an activity supports an organization’s exempt purpose is not enough to exempt the income from unrelated business income tax.

2.

Corporate sponsorship vs. advertising – several non-profits have corporate sponsors, be careful not to specifically endorse their products or services or otherwise fall into the “substantial benefits realm.”

3.

Links and banners – the IRS believes a static banner ad or a link to a sponsor retains its nature as an acknowledgment of a sponsor; however, a dynamic banner ad begins to take on the characteristics of an advertisement. Some non-profits have been successful in soliciting sponsorships in exchange for banner ads or links on the organizations website. Again, as long as the ad or link only identifies the sponsor, these will likely be considered acknowledgements – but be careful if there is any endorsement or testimonial regarding the sponsor (see number 2 above.)

4.

Affiliate programs – monetizing websites is becoming a big deal in the on-line community and may seem attractive to cash strapped non-profits. Companies such as Amazon.com and others provide for affiliate programs where the organization receives a percentage of sales generated from the website. In addition, Google and others pay host sites for “clicks” on advertisements placed on the website. Google adsense revenue would likely be considered non-exempt advertising revenue. Sales of products online would likely be considered along the same lines as sale of products through a museum shop or gift shop, etc. That is if the products sold is related to the organizations exempt purpose then it is exempt – if it isn’t related to the exempt purpose then it is unrelated business income.

5.

Solicitation issues – in general, a non-profit that solicits charitable contributions, by any means, within the borders of a state is subject to its laws, regulations and registration requirements. The terms “charitable” and “solicitation” are broadly defined and may be applicable to telephone calls, e-mails, advertising, direct mail or even a website posting directed to a states residents.

6.

Evidence of lobbying – there are strict rules and regulations concerning lobbying activities of non-profit organizations. Due to the ease of running and updating websites, it becomes easy to promote issues or causes for which your organization is passionate about. Be careful not to inadvertently put the organizations exempt status at risk.