Corporate sponsorship is the financial payment by a business to a nonprofit to further the nonprofit’s mission, that is generally accompanied by an acknowledgment that the business has supported the nonprofit's activities, programs, or special event. A successful corporate sponsorship benefits both the charitable nonprofit and its sponsor. However, in order for a corporate sponsorship to be appropriate and legal, the benefit to the for-profit entity should not outweigh the benefit to the tax-exempt charitable nonprofit.
Background: Research shows that for-profit support for “cause” work has become increasingly important to American consumers. Data from the 2013 Cone Communications Social Impact Study indicate that “more than nine-in-10 [consumers] look to companies to support social or environmental issues in some capacity” and “nearly all U.S. consumers say that when a company supports a cause, they have a more positive image of the company (93%).” Corporate sponsorships attract the attention of for-profit businesses because they offer public recognition of the business’s service. and help businesses expand their markets. Charitable nonprofits, in turn, receive financial support and may also experience increased attention from the media and the public.
Examples of high profile corporate sponsorships include Macy’s “Go Red” Campaign with the American Heart Association and Avon’s Breast Cancer Crusade.
Consider these "readiness" factors before reaching out to recruit a corporate sponsor:
Be aware that corporate sponsorships can result in unintended tax liability, even for tax-exempt charitable nonprofits. We encourage you to read the Council of Nonprofit’s resources regarding the tax treatment of corporate sponsorship income below, that will help you distinguish between non-taxable charitable contributions by a business to a nonprofit, and payments by a business to the nonprofit that the IRS will find results in taxable income to the charitable nonprofit as “unrelated business income.”
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