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Q: What kind of ads are we prohibited from selling in our nonprofit publications, and why?

Answer: You advertising sales program is impacted by three factors that might limit what ads you can sell: your organization’s policies, your US Postal Service permit status, and the total income you report to the IRS. All three are covered in our new book due for publication in Spring 2007. Here’s a quick summary.

Organizational prohibitions – most nonprofit organizations reject ‘sin’ ads such as tobacco, alcohol and pornography, and your organization may have other ethical or mission-driven conflicts with certain advertisers. Ask your organization’s leadership to draw up a list of products that would compliment your mission and sell ads to those companies.

Postal restrictions – the post office charges higher prices for advertising material than for editorial content. No matter what kind of mailing permit you obtain, you will pay more postage if you carry ads. But that extra postage is generally easy to recover from ad income. In addition, if you mail by one specific permit category – nonprofit standard mail – then you are prohibited from running any ads for financial services, travel, or insurance. All of the postal regulations are available in the Domestic Mail Manual on their website. You can also get help with this question from your printer or circulation consultant.

IRS restrictions – ALL advertising income is classified ad ‘unrelated business income’ by the IRS, but it does not directly prohibit any kinds of ads from nonprofit publications or websites. You will pay taxes on your profits from advertising sales (meaning any ad dollars that exceed your publishing costs). The IRS provides explicit instructions for calculating advertising sales profits at their website: General Rules for UBIT and for more information on IRS rules about UBIT, read IRS Publication 598, Tax on Unrelated Income of Exempt Organizations, available online at www.irs.gov, or by calling the IRS at 800-829-3676. You should share these documents with your accountant.

This topic is covered in our new book from Nolo publishined in May 2007, Every Nonprofit's Guide to Publishing. You can email us if you have other questions we should answer.

 
 

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