Corporate Sponsorship
Corporate sponsorship is a funding mechanism in which a commercial entity supports a charitable or educational organization (such as a PTA) with cash, products, or services in exchange for acknowledgment or recognition of the sponsor’s support. Sponsorships can relate to a specific event or to the PTA as a whole.
Corporate sponsorship is an appropriate means of funding projects and programs that promote the objectives of the PTA. Corporate sponsorship stands in contrast to endorsement, in which the PTA extols the virtues of a company’s products or services. Endorsement activities are not appropriate for PTAs based on PTA’s noncommercial policy.
A special provision in the Internal Revenue Code provides that 501(c)(3) organizations are exempt from paying federal income taxes on income from corporate sponsorships as long as IRS guidelines are followed. According to IRS Publication 598, qualified sponsorship payments are payments “made by a person engaged in a trade or business for which the person will receive no substantial return benefit other than the use or acknowledgment of the name, logo, or product lines in connection with the organization’s activities.”
As a general rule, the PTA may thank the sponsor for its support. The thank-you may be in writing or on posters, banners, or other appropriate media. It must be limited to an expression of thanks and can list identifying information of the sponsor, including name, address, phone number, website address, and logo. The sponsor’s product(s) can also be distributed as part of the acknowledgment.
“Use or acknowledgment” does not include advertising, which includes the following:
- Qualitative or comparative language (such as “this is the best”)
- Price information or other indications of savings or value
- Endorsement
- Other inducement to purchase, sell, or use a sponsor’s products or services
Sponsorship payments that constitute advertising will be subject to federal income tax. On the other hand, qualified sponsorship payments are considered to be charitable donations, and there is no limit to the amount that can be received by the PTA.
Commercial Co-Venturing
Commercial co-venturing is a form of fundraising in which money is paid to a business for a product or service and a portion of that money is forwarded, as a gift, to the PTA. Given PTA’s noncommercial policy, the only appropriate role in any such venture is a passive one. Active promotion of the business’ products or services by the PTA and its members would violate this policy. Additionally, such fundraising activities should be structured to protect PTA’s tax-exempt status and avoid unrelated business income. The funds received by PTAs from such agreements should be accounted for as contributions on their financial records.
Example of Commercial Co-Venturing would be Spirit Nights.
Donations
Many PTAs ask local businesses to make donations -- food, services, or money -- to the school's PTA for specific events. For instance, a local pizzeria might be willing to provide pizzas and drinks for a PTA event, or a yoga studio might say yes to providing a yoga class at health/exercise event. For PTAs that have auctions or galas, solicitation of goods and services from local business that can be auctioned off can be critical.
Donations of food, services and/or merchandice can be very beneficial so don't discount these types of items. Sample Letters are included below.
Donation Fundraisers
Some PTAs have had good success with donation-type fundraising efforts, either as a “no fundraiser” direct solicitation for tax-deductible donations or in conjunction with a student jog-a-thon, read-a-thon, or similar activity. Others have run profitable auctions of donated merchandise, which may or may not result in the collection of donations.
Putting 100 percent of the funds collected into PTA programs is the primary advantage of these types of fundraisers. Psychologically, that can be a big selling point for parents. On the other hand, some PTAs end up making less money than they would if they had worked in conjunction with a commercial vendor to sell a product or service. The amount of time and energy required of PTA volunteers might be the same as or even more than (particularly in the case of auctions) it is for sales-type events.
If a PTA decides to conduct a donation fundraiser, the treasurer and event chair must be familiar with the IRS rules regarding substantiation and disclosure summarized in the "Exempt-Organization Issues" section of this handbook. When there are no goods or services provided to donors and individual donations are less than $250, such as in a jog-a-thon event, the PTA may want to provide notification to potential donors that receipts will be provided only upon request or that the donor’s canceled check will serve as his or her receipt. For an auction event, advance preparation of receipts that include the value of the goods or services to be auctioned will help facilitate compliance with the disclosure requirements.
Charitable Solicitations Act
In Utah, under the Charitable Solicitations Act, charitable organizations are required to be registered with the Utah Division of Consumer Protection before soliciting charitable donations. “Charitable solicitation” means any request, direct or indirect, for money on the representation that it will be used for a charitable purpose. Additional information about the Charitable Solicitations Act can be found at https://dcp.utah.gov/businesses/charities.html
The law provides an exemption from the registration requirement for a PTA organized within and authorized by a school in support of the operations or extracurricular activities of the school. Local PTAs do not need to submit anything. It is done by the Utah PTA Treasurer.