Nonprofit Question

[erchess]

I am considering paying money to a nonprofit organization in return for their adding my business to their list of business sponsors that is prominently displayed on the web, in emails, and in postal mail. What I want to know is whether the charity is able to report this money simply as a charitable contribution and if so whether I can still call it an advertising expense on my Sch C. I don't itemize so I can't think of any way that I could deduct it otherwise.

[Uncle Sam]

NonProfit Question

For you - it's an advertising expense - you're paying for the right to use your business name in some form on their news media.
The non-profit must record it as advertising income - NOT as a contribution - because you're receiving a FMV benefit in exchange for your check.
On their books it should be recorded as a non-exempt purpose income - since I doubt their exempt purpose is to provide and sell advertising space.
A contribution would be if there were no goods or services in exchange.

[erchess]

However

depending on how the code reads, I think that their exempt purpose is either to build a local athletics facility for use by the public and by athletic teams from local High Schools, or perhaps to raise money for the construction. Could that by chance be used to treat corporate sponsorships as exempt income on its face? And if not, what if the official rule is that corporate sponsorships are free but the corporation is expected to make a donation and perhaps agree to have the amount of its donation publicized?

I know as yet almost nothing about the particular group to which I may give money. I ask the question because I have found that charities in my area knowingly push the rules to the very limit. For example, I once belonged to a church that had a very large and wonderful facility which was often made available to community groups. The official story was that use of the facility was free but we would of course accept a love offering. Groups that did not make large enough love offerings were told bluntly after one use how much they needed to pay for the second use if they wanted a third. The Love Offering expected was comparable to what space costs in local establishments that exist to provide space at a profit. We were being as charitable as Microsoft and not a bit more so. The leaders of the church never understood why neither I nor any other Tax Professional would agree to be a Trustee of the Church.

[JohnH]

If I were making the payment in order to receive a mention in their newsleter, web site, etc, then I'd deduct it as an advertising expense without regard to how they handle the transaction. I'm assuming they provide an invoice or other documentation to support the payment.

All I'd be concerned about is proper treatment of the transaction on my tax return. If they happened to send me a contribution receipt at the end of the year in error, I'd just toss it. There's all sorts of accounting nonsense and misunderstanding at every level in non-profit & tax exempt organizations, but that doesn't alter how the transaction should be treated for tax purposes as long as there's a valid business reason for the expense and it's an ordinary & necessary expense of the paying entity.