[Foundation-discuss] Rewarding sponsors with acknowledgement in source/logos on website?

Fri, 27 Nov 2015 13:57:08 -0500

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On 11/27/2015 12:45 PM, Dave Botsch wrote:
>=20
>>
>> The first one seems a bit problematic to me, unless there are at least=
 a handful of such sponsors and there's some diversity among them.
>>
>=20
> I agree and disagree. It could potentially look bad if there's just one=

> or two. On the otherhand, it singles those one or two out and perhaps
> sends a message to others.=20
>=20

I am not a lawyer but the OpenAFS Foundation is a 501(c)3 and as such it
must adhere to Federal laws governing charities.

As such, if the Foundation is giving something in exchange for a
donation then it must be able to measure the value to the item being
given and such item must be deemed to be of "insubstantial value".
Otherwise the transaction might be deemed an "excess benefit
transaction" which can result in penalties for both parties.

If the Foundation is not treating the sponsorship as a charitable
donation then the transaction is not tax exempt and might fall under the
"unrelated business income" rules and limitations.

In addition, a 501(c)3 cannot be deemed to be benefiting any private
entity.  As such a benefit given only to one entity even if offered to a
broader set can be deemed impermissible.

Finally, a 501(c)3 (except for a private foundations) is required to
demonstrate broad support from the general public.  As such it must be
careful not to accept donations that will lead the IRS to conclude the
organization is not representative of the general public.   The IRS
regulations provide guidance on the percentages of donations that can be
large versus small.

Sponsorships work well for organizations with a broad base of individual
donations that balance the much larger corporate contribution. This is
the reason that corporations and wealthy individual donors often offer a
matching contribution up to a limit instead of a straight donation.  It
permits the contributing entity to make the donation and obtain the
public relations benefits of doing so without putting the charitable
organization's tax exempt status at risk.  Of course, if the charitable
organization is unable to solicit a sufficient number of small
individual donations, it cannot access the money.

I suggest that the Foundation Board consult with a tax attorney
specializing in 501c3 tax law before it proposes sponsorships or
benefits (material or otherwise) in exchange for donations.

Jeffrey Altman

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fn:Jeffrey Altman
n:Altman;Jeffrey
org:AuriStor, Inc.
adr:Suite 6B;;255 West 94Th Street;New York;New York;10025-6985;United St=
ates
email;internet:jaltman@auristor.com
title:Founder and CEO
tel;work:+1-212-769-9018
note;quoted-printable:LinkedIn: https://www.linkedin.com/in/jeffreyaltman=
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