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Use Of Donation

Defamation Law Discussion Forum

Use Of Donation

Postby Beacan » Sat Nov 26, 2016 8:58 am

Can a 501c3 take a donation and utilize it as a prize to support the sale of something which would in-turn provide a portion of it's proceeds as a monetary donation to the non-profit?  To be a little more specific, an author has generously offered to donated a portion of every book sale to a non-profit.  This particular book has a sweepstake attached to it(enter to win).  Can the non-profit solicit prize donations for that sweepstakes, offering a tax deductible receipt for the donor(with the knowledge that they would be benefiting from the sale of each book)?
Beacan
 
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Use Of Donation

Postby Garland » Sat Nov 26, 2016 11:51 am

Can a 501c3 take a donation and utilize it as a prize to support the sale of something which would in-turn provide a portion of it's proceeds as a monetary donation to the non-profit?  To be a little more specific, an author has generously offered to donated a portion of every book sale to a non-profit.  This particular book has a sweepstake attached to it(enter to win).  Can the non-profit solicit prize donations for that sweepstakes, offering a tax deductible receipt for the donor(with the knowledge that they would be benefiting from the sale of each book)?
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Use Of Donation

Postby Meadhra » Mon Nov 28, 2016 12:24 am

A 501(c)(3) organization may not be engaged in activities that provides substantial private benefit to an individual. An extensive discussion by the IRS of the private benefit issue relating to 501(c)(3) organizations is found at http://www.irs.gov/pub/irs-tege/eotopich01.pdf

If the 501(c)(3) organization promotes the book of that individual then it may be engaged in giving too much private benefit.  But, if the 501(c)(3) organization treats the income as advertising income it may not have to face the consequences of the private benefit issue, but only if it receives from the author at least fair market value for the advertising. See the 1994 IRS internal memorandum "Corporate Sponsorship Income" www.irs.gov/pub/irs-tege/eotopico94.pdf especially page 10 "Advertising v. Acknowledgment".

Also see www.irs.gov/pub/irs-pdf/p3079.pdf "Gaming Publication for Tax-Exempt Organizations" as, evidently the 501(c)(3) organization will be promoting the sweepstakes and mentioning it it its solicitations.

I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations.  But I will give you the link for New York's law that regulates raffles and sweepstakes. N.Y. Rac. Wag. Law §§ 185 to 195r http://law.onecle.com/new-york/general-municipal/article9-a.html Harvey Mechanic

Attorney at Law [email protected]

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.
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