This is a common line of questioning from the nonprofit community–Are we allowed to sell advertising on our website (or our newsletter or event programs)? Generally speaking, the answer is yes. Nonprofits are allowed to generate revenue through the sale of advertising. Two issues are worth keeping in mind. First, nonprofit leaders should never lose sight of the fact that the organization’s time and resources must be exclusively (translated for practical purposes as predominately) devoted to the pursuit of the organization’s charitable mission. If an organization’s advertising activities become so wildly successful and widespread that it begins to take priority over the charity’s core mission, then the organization’s tax-exempt status could be jeopardized. This would be very rare, but it does happen.
Second, the advertising revenue generated will likely be considered unrelated business taxable income (i.e., income generated from a trade or business activity regularly carried on that is not substantially related to the charitable mission of the organization). Net unrelated business taxable income in excess of $1,000 per year will be subject to income tax.