Unlike many nonprofits that are operating under the crushing weight of our economy, we can (attempt) to raise additional funds by focusing additional efforts on ad sales for our magazine. Since another salaried employee is outside our budget, we are curious if we, as a 501(c)(3) organization, could hire a commission-only sales rep for classified ad sales or add a commission incentive for the display advertising rep. These commission programs would only apply to ad sales and not fundraising, of course.
You may pay advertising sales reps on a reasonable commission basis without violating any federal tax law. (You can also pay fundraisers on a commission basis without violating federal tax law, but the professional fundraising organizations say it is unethical.) The net revenues generated by increased advertising sales will most likely produce unrelated business taxable income, but so long as the advertising is not deemed to be a substantial activity that jeopardizes your tax exemption, it can be a good way to raise extra income. (See Ready Reference Page: “Nonprofits Often Worry About UBIT.”)
You should be sure that you sell the advertising for its benefit to the advertiser, however, and not as a contribution to the organization. Many state charitable solicitation registration laws define solicitation to include selling advertising on the representation that some or all of the revenue will be used for charitable purposes. If the ads are sold as contributions, ad reps who are not employees of your organization may have to register as charitable solicitors. That would not be a good result.
For more information about charitable solicitation registration, consider purchasing our webinar - State Charitable Solicitation Statutes - Everything You Wanted to Know But Were Afraid to AskFor more information on the recording, visit our bookstore.
State Charitable Solicitation Statutes: Everything You Wanted to Know But Were Afraid to Ask
Charities that seek contributions nationally must typically register in 39 states and the District of Columbia before starting to solicit. Furthermore, for-profit fundraisers are also required to register and file their contracts and other documentation with many states. Since many states are increasing their enforcement efforts to ensure that charities and fundraisers are complying with initial and annual registration requirements, it's important that charities and fundraisers abide by these statutes.
Program materials include an extensive review of the statutes and their provisions, plus a copy of the Uniform Registration Statement for multi-state filings. Purchasers will receive an e-mail receipt that includes a link that will take them to the product download. The download is a pdf file. Learn More
Weekly question and answer
Notice of each full edition
and its free stories
Report on 501(c)(3) electioneering
What our readers say about Nonprofit Issues
Once again you've tackled a tricky question and explained it so we all can understand the issue.--M.V.
Thank you for your informative and keen advice on nonprofit matters. I believe it's a unique and concise place to get answers to this often wispy area called nonprofit. --R.T.
Have a question?
Other ways to
Talk to the Editor
Next Conference Call:
Wednesday, October 8, 2014
Participate in this bi-monthly telephone seminar conference call and ask your questions directly to Editor Don Kramer.
Access the entire site
($9.95/24 hours, $17.95/3 months).
Full Day Program
A well-received full-day program that covers the current hottest topics in nonprofit law. Qualifies in Pennsylvania for Continuing Education credits.
Don is available for programs and speaking engagements ranging from a one-hour presentation to a full-day primer on nonprofit law. Contact us if you are interested in having him speak at your program.