On this episode, we will discuss how nonprofits can respond when they are asked to share their resources with others. Whether it’s data, a mailing list, office space, or something else of value, your nonprofit needs to know what to do when asked to share its assets with other people and groups. And guess what! Your organization’s tax status will come into play. If you’re a 501(c)(3), you need to be particularly careful, especially when interacting with non-(c)(3)s. We’ll dive in deep and answer the question “Can We Rent (or Share) That?” in the minutes to come.
Our Attorneys for This Episode:
Monika Graham
Natalie Ossenfort
Victor Rivera
General Principles when sharing resources and working with other organizations:
· Principle #1: Moving resources from a 501(c)(4) to a 501(c)(3) is simpler from a legal standpoint than the reverse (uphill / downhill principle).
· Principle #2: Your tax-exempt status follows you into your transactions with others.
· Principle #3: Documentation is important.
· Principle #4: Stay in your lane.
What does this have to do with renting and exchanging resources?
· 501(c)(3)s are prohibited from supporting or opposing candidates, including making contributions to candidates and political organizations.
· 501(c)(3)s should not provide resources to a 527 without charge. Instead, they should rent or sell these types of assets for fair market value and make them equally available to any other political entities that request them.
o Best practice is to use a list broker.
· When supporting the work of (c)(4)s, which can engage in some partisan political activity, 501(c)(3)s must be mindful to protect their assets and to ensure that they aren’t giving away their lists, data, and spaces for partisan political use for free and that any rental transactions are well documented and comply with the law.
Can our (c)(3) rent out event space to candidates and other types of organizations?
· Whether something constitutes impermissible support or opposition of candidate depends on the facts and circumstances. Some things the IRS considers in the event space rental context include (Rev. Rul. 2007-41):
o Whether the facility is available to all candidates in the same election on an equal basis,
o Whether the fees charged to candidates are at the organization’s customary and usual rates,
o Whether the activity is an ongoing activity of the organization or whether it is conducted only for a particular candidate, and more!
· Discussion of two examples.
What about newsletter ad space?
· If a 501(c)(3) rents / sells ad space in its newsletter or other publications, it can offer that same service to others (even candidates), but it must charge fair market value and allow all entities and candidates the same access without regard to political preferences.
o Remember to indicate which ads are “paid advertising” in the publication.
· If it usually gives out ad space for free (instead of requiring a financial transaction), it could potentially do the same with other organizations, but all free content must be nonpartisan.
· What if a (c)(4) has a newsletter and wants to provide ad space to a (c)(3)?
o It’s easier for (c)(4)’s to share resources with (c)(3)s since (c)(4)s can do everything (c)(3)s can do, and more!
o A 501(c)(4) could rent space to the (c)(3) for fair market value or give it away for free.
Voter Registration Files
· 501(c)(3)s should not freely share with partisan organizations the voter registration lists or other data that it collects during voter registration or education activities.
· This information is a valuable asset owned by the 501(c)(3). Voter registration files may only be rented to a 501(c)(4) or 527 at fair market value or exchanged for data of equal value. Even then, the circumstances in which these agreements can be made are complex, so it’s wise to get legal advice.
· This type of agreement can also cause opposing parties or groups to raise their eyebrows and question the legality of the transaction. Before engaging in this type of transaction, figure out how much risk your organization is willing to incur.
501(c)(3)s can’t give things away for free to non (c)(3)s that could potentially use the (c)(3)’s assets for partisan political purposes. So, if you’re thinking about sharing your organization’s resources with others, exercise caution and consult with counsel when needed.
Resources:[NO1]
Election Checklist for 501(c)(3) Public Charities
Monika, can you add a resource link to that revenue ruling you cited in the event space discussion? [NO1]