A 501(c)(3) exempt organization risks losing its exempt status it “participates” in a political campaign. The IRS has said that it is not a participation in a political campaign if a candidate rents space or facilities from a charity that is available to the general public and the candidate gets no favorable rate. It would arguably be “participation” if the organization denied the same service to other candidates. Therefore, a nonprofit selling advertising space to one candidate in a particular race should consider offering comparable space to the other candidates in that race to avoid the appearance of favoring a particular candidate.

On a related note, advertising revenue of this type could be classified as unrelated business taxable income (“UBTI”) if the activity or event is construed as a trade or business “regularly carried on” and unrelated to the organization’s charitable purpose. The rules concerning UBTI are complicated, and there are many exceptions to those complicated rules, so nonprofits should seek advice from their legal and tax advisors when those issues arise from time to time.

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