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STC

Tieline

Volume XX
Number 5

Ask the Office: Can My Chapter Offer Corporate Sponsorships? and Other Chapter Income Questions

Editor’s note: The following information is intended to be helpful and should not serve as a substitute for legal or professional tax counsel.

Q: My chapter would like to offer corporate sponsorships to businesses. Is this permissible?

A: The following information is provided by Jacqueline Henson, STC’s legal counsel.

Yes, offering corporate sponsorships is permissible. As part of their sponsorship, you may acknowledge participating companies by thanking them at your general membership meetings. Adding your corporate sponsors’ logos and Web site links to your community Web site is also perfectly acceptable. Funds from corporate sponsors are not taxable.

Q: What part of a corporate sponsor’s donation is tax deductible to the contributor?

A: The value of the donation depends on whether the contributor decides to designate the amount contributed as a charitable deduction or a business deduction. Our attorney and auditor strongly advise chapters to refrain from giving anyone tax advice as to what is or is not deductible.

Q: Are there certain activities for which STC chapters must pay taxes?

A: STC was granted 501(c)3 tax-exempt status based on its charitable, educational activities. Certain activities are tax exempt, such as holding educational events or publishing articles of interest. Other activities are considered “unrelated” to the tax-exempt purpose, and income from these activities is subject to being taxed. This tax is called unrelated business income tax (UBIT). For example, income from advertising and online job postings is subject to UBIT.

Q: Can my chapter sell advertising space in our newsletter or on our Web site or earn income from online job postings?

A: Yes. Associations typically offer advertising and job market opportunities, whether in person or online. However, these are not tax-exempt activities.

Q: May we offer our corporate sponsors free job postings?

A: We advise against combining corporate sponsorships with job postings. At the minimum, the IRS may determine that to “offer” such postings to corporate sponsors is a veiled way of selling advertising or generating job postings. In that case, the IRS would require tax to be paid on the income generated.

Q: May my chapter sell coupon books for fundraising purposes?

A: If these are the typical coupon books that some organizations make available to charities to use for fundraising, chapters may sell them, keep the income as fundraising income, and pay no local or state tax or federal UBIT. The activity is not considered to be a regular business, and the “salespersons” are volunteers.

Q: What forms does my chapter have to file with the IRS?

A: Chapters with $25,000 of income (from any source, including dues) must file a Form 990 with the IRS. The IRS permits STC to submit a group tax filing on behalf of all chapters with income over $25,000. The STC office will handle this for such chapters, which need to fill out an appropriate form with the required information.

There is a new rule pending at the IRS that would require chapters with incomes less than $25,000 per year to file a special 990-E form. The STC office is monitoring any developments carefully; no further details are available at this time.

If any chapter has UBIT net income over $1,000, that chapter must file a special Form 990-T (even if its total revenues are less than $25,000). The first net $1,000 of unrelated business income is exempt from taxes. The STC office will assist chapters with this form as well.

Chapters will need to calculate their net UBIT income. This means they can deduct related expenses from their gross income to calculate net income.

For example, a chapter collects $1,000 for a one-page ad in a four-page newsletter. The cost of the four-page newsletter is $400. The chapter may deduct one-fourth of the newsletter expenses from the $1,000, to get a net income of $900. The first $1,000 of net UBIT income is not subject to taxes. Therefore, the chapter would not need to file Form 990-T.