June 12th Webinar, CAP Units & Sponsorship - DOs and DON'Ts, and a Member Asks...Are Silent Auctions OK?

Civil Air Patrol

Field Fundraising Newsletter

April-May 2019

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Inside this issue...

How to keep that sponsorship from becoming taxable, register for the matching gifts webinar to be held June 12th, fundraising sessions at National Conference, a member asks about silent auctions, and it's about partnerships and more!

Your Unit Has A Corporate Sponsor - How To Ensure The Gift Remains a Charitable Contribution

Infographic and content courtesy of National Council of Nonprofits

Congrats! Your unit has been successful in fundraising and has corporate sponsors to celebrate. Before you promise the moon and stars in return for their commitment, it's imperative to ensure you don't change the tax parameters of the gift. Gifts should remain a charitable contribution and tax-free to CAP.

What does this mean?

The IRS will look at the payment made to a nonprofit by a corporate sponsor and decide whether the payment is a tax-free gift (charitable contribution) or a taxable advertising payment. The IRS focuses on whether the corporate sponsor has any expectation that it will receive a “ substantial return benefit ” for its payment. If so, the payment will result in taxable income for the nonprofit that is reported on IRS Form 990-T. (See rules described in Internal Revenue Code, Section 513(i). )

Ideally, the payments would be structured and documented so that the IRS classifies the payments as charitable contributions that support the fulfillment of the nonprofit's mission. One way to ensure that the payments are not taxable is to tailor the sponsorship so that the payments meet the IRS definition of " qualified sponsorship payments ." A qualified sponsorship payment is acknowledged by the charitable nonprofit in the same way as any other charitable donation. (See the IRS website for more information regarding acknowledging contributions .)

However, if the payment to the nonprofit does not meet the requirements of qualified sponsorship payments, such as because the sponsor receives a “substantial benefit” in return for the sponsorship, the revenue will be classified by the IRS as taxable income.

These factors may result in taxable income:

Exclusivity: if a nonprofit promises a for-profit that it will be the “exclusive” sponsor, that promise may trigger a finding of “substantial return benefit” if the IRS finds that being the exclusive sponsor confers a substantial benefit on the sponsor. (See IRS guidance on Exclusive Provider Arrangements.)
Providing prices, indications of savings or value, endorsements, or inducements to buy a sponsor’s products or services.
Providing a link from a sponsor’s name/logo on the nonprofit’s website to the page of a sponsor’s website where a product or service is sold, or listing the phone number where the product or service can be ordered.
Providing more than token services or other privileges to the sponsor in return for its sponsorship payment, such as tickets to an event that are complimentary and not otherwise available to the public, or lavish receptions.
Accepting a payment from a corporate sponsor that is contingent upon the level of attendance at the nonprofit’s event.
Providing sponsors with advertising or acknowledgments in a nonprofit’s regularly scheduled and published materials, such as an eNewsletter.
Corporate sponsorship payments that are provided in return for specific advertising opportunities.

Factors that do not automatically result in taxable income:

The sponsor’s name, logo, general phone number, locations, and internet address in printed media, or on a nonprofit’s website.
Value-neutral displays of a sponsor’s products or services or the distribution of

free samples of a sponsor’s products at a nonprofit’s event. The nonprofit

should not endorse the product/service.

A single static internet website link that takes the viewer only to the sponsor’s home page – not to a page where a product or service is marketed or sold.

Some payments are both taxable and non-taxable:

Payments from a business sponsor can actually be a mixture of charitable contributions and advertising. For example, while it is fine to acknowledge a corporation's support for a conference or special event with a banner and a public 'thank you' from the podium, if the sponsorship “package” also includes a full page "ad" in the conference brochure, with text written by the corporation that promotes its products and services to attendees at the conference, at least some of the corporate sponsorship payment is likely to be considered advertising income. In such cases the nonprofit will have to report that portion of the income as "unrelated business income" ("UBI"), subject to tax ("UBIT" = "unrelated business income tax").

Read the full article at the National Council of Nonprofits website

Looking for more guidance, see CAP Regulation 173-4

Is the article above helpful to you?

Yes, it really helped to clarify how we should be talking to sponsors

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Maybe... it sounds like something I should know, but I'm not sure?

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Our unit is still brand new to fundraising and this seems a little advanced

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Don't Miss This!

WEBINAR

Wednesday, June 12th

8 PM Eastern/ 7PM Central/ 6 PM Mountain / 5 PM Pacific and 2 PM Hawaii

Looking for an easy way to engage your members, parents and friends of your unit to support Civil Air Patrol?

Civil Air Patrol's Development Department has a list of more than 19,000 employers who will match the charitable contributions of their employees and/or volunteer hours. Less than 2% of our senior members access the program and more than 10% are eligible. Our squadrons and wings are leaving charitable dollars on the table that could be used for overhead costs, cadet programs, etc.

We have units that receive funding of $250 to more than $15,000 a year through this program.

In this brief webinar, you will learn:

What is the matching gifts program
How will it benefit your squadron
How easy is it to add the link to your unit website
How do you market to your unit
Q & A session

Grab More Great Fundraising Tools at CAP's National Conference!

Visit the Civil Air Patrol's National Conference website

Networking, Fundraising Workshops and More. We Hope To See You There! Registration is Now Open!

Grants from $250 and up to $5,000

CAP units have successfully received grants up to $5,000.

Get to know your local manager and share about your local unit.

THEN fill out the application.

New calendar year for applications began 15 February 2019

Learn More about the Walmart and Sam's Clubs Community Grant Program

This Month's Member Fundraising Question

Q. " Interested in hosting a silent auction as a fundraiser during a CAP event. Is this allowed? Has it been done before? Are there any resulting best practices? "

Submitted by 1st Lt Karista Bradley,

PCR-OR-085

A. A traditional charity auction is an event where goods or services are sold off to the highest bidder. The money then goes toward a specific cause or project in your local unit or Wing.

Auctions can be a great way to raise money, but they do take a considerable amount of time and volunteer effort. Good planning is key to a successful auction.

Communicate clearly to potential businesses why you are soliciting items for auction and what you will utilize the proceeds to accomplish.
Track donations and provide in-kind donation receipts (See CAP Regulation 173-4)
Organize the auction with bid sheets or a software program (% of auction sales paid to a 3rd party software vendor is prohibited by CAP Reg 173-4)
Create a clear check-out process so participants are not made to wait at the end of the event.

One of our favorite auction ideas is to auction whole desserts to tables following dinner. Everyone loves cake and it's a great way to raise money.

Before you promise a tax benefit to the donor of the item o r the purchaser of the item, you need to know the IRS rules for Charity auctions.

"Donors who purchase items at a charity auction may claim a charitable contribution deduction for the excess of the purchase price paid for an item over its fair market value. The donor must be able to show, however, that he or she knew that the value of the item was less than the amount paid. For example, a charity may publish a catalog, given to each person who attends an auction, providing a good faith estimate of items that will be available for bidding. Assuming the donor has no reason to doubt the accuracy of the published estimate, if he or she pays more than the published value, the difference between the amount paid and the published value may constitute a charitable contribution deduction.

In addition, donors who provide goods for charities to sell at an auction often ask the charity if the donor is entitled to claim a fair market value charitable deduction for a contribution of appreciated property to the charity that will later be sold. Under these circumstances, the law limits a donor's charitable deduction to the donor's tax basis in the contributed property and does not permit the donor to claim a fair market value charitable deduction for the contribution. Specifically, the Treasury Regulations under section 170 provide that if a donor contributes tangible personal property to a charity that is put to an unrelated use , the donor's contribution is limited to the donor's tax basis in the contributed property. The term unrelated use means a use that is unrelated to the charity's exempt purposes or function, or, in the case of a governmental unit, a use of the contributed property for other than exclusively public purposes. The sale of an item is considered unrelated, even if the sale raises money for the charity to use in its programs."

One final thought for consideration... because CAP focuses heavily on youth programs, we recommend you decline the donation of questionable auction items that do not reflect or embody the core values of our programs and missions. If in doubt, ask.

Just a reminder: Per CAP Regulation 173-4, you'll need approval of both your squadron commander and your wing commander.

Click Here to Download the Unit Fundraising Best Practices Guide

Tell Us About Your Unit!

How much does your unit fundraise annually? (approximately)

More than $20,000... we ROCK!

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More than $10,000 but we haven't surpassed the $20,000 mark, yet!

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More than $5,000, but we want to raise more!

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Less than $5,000 and more than $1,000.

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Less than $1,000 a year.

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Fundraise? What's that?

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The Civil Air Patrol 2019 National Theme is Celebrating our Partnerships!

Civil Air Patrol already has great partnerships with organizations such as Boys and Girls Clubs of America, Air Force Association and Arnold Air Society.

We know there are many great partnerships at the local or state level. Would you be willing to tell us about yours?

Does your Unit Have a Partnership Story to Share?

Yes - please contact us!

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No - but I would be interested in learning more about developing partnerships!

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Watch CAP's Memorial Day Weekend Video

Click here to make a Tribute gift

Click here to purchase a brick in CAP's Heritage Park

The Civil Air Patrol Giving webpage offers donors the ability to make gifts in memory or honor of someone special. Donors who use the links above may specify their gift to a local unit. Tribute gifts made through the above buttons are listed in each issue of the Civil Air Patrol Volunteer magazine.