Question: As a response to an identified need in our community regarding housing for the underserved, we have been asked to sponsor a table for Habitat for Humanity. Can we count this sponsorship as community benefit since it meets an identified need?
Recommendation: You may count the sponsorship as community benefit if you can restrict how your contribution will be used in a restricted use letter. However, we’ve found that often the use of the dollars associated with these types of sponsorships is at the discretion of the receiving organization and may be used for many different things. Therefore, if you cannot submit your sponsorship dollars with a restricted use letter, we recommend supporting the organization directly with a contribution accompanied by the restricted use letter and having the sponsorship for a table come from another departments budget (like marketing) rather than community benefit.
Question: We host an annual golf outing. All of the funds raised go directly back to the community for identified unmet health needs i.e. immunization, health profession shortage scholarships, parish nursing, etc. Should we count the expenses to put on such an event as community benefit?
Recommendation: The task force recommends that organizations consider the following guidelines when deciding whether to report fundraising costs for golf outings, galas and other entertainment-oriented events:
- Do not report any costs if the primary purpose of the event is marketing/public relations.
- Do not report costs related to entertainment aspects (green fees, prizes, food).
- Report other expenses associated with fundraising, such as staff time, if all of the proceeds go to community benefit.
- Be very conservative and be sure any expense reported passes the "laugh test."
We recommend that when a hospital organization is asked to co-sponsor (contribute to) a fund raising event sponsored/hosted by another nonprofit organization with proceeds going to an activity that would qualify as community benefit, the hospital count as community benefit the percentage of the sponsorship expense not related to marketing For example, a hospital may decide that 75 percent of the donation is community benefit and 25 percent of the donation was for marketing exposure. There should be written correspondence to the sponsoring organization directing that the proceeds funds be restricted for an identified community benefit activity.
Question: We have a practice of counting 40% of our sponsorship funding as community benefit since we do get marketing exposure. Is this appropriate?
Recommendation: IRS rules say that to be reported the activity must be "carried out or supported for the express purpose of improving community health" and " the activity or program may not be reported if it is designed primarily for marketing purposes." (worksheet 4) Therefore, an activity that is 60% marketing would not meet this criteria.
In addition, some things to keep in mind:
- Some donations, including to valuable community organizations, really should come from the marketing or other budget within your organization.
- You may want to donate to organizations funds to carry out specific activities that clearly would be reportable as community benefit.
- While not required by any IRS instruction, you and your team might want to consider: is this the most effective way to use our community benefit budget?
Question: All the organizations we support provide services that clearly meet the needs defined in our CHNA and CHIP, but what about organizations who provide other support and services?
Recommendation: IRS instructions (worksheet 4) say: "To be reported, community need for the activity or program must be established. Community need can be demonstrated through the following.
- A CHNA conducted or accessed by the organization.
- Documentation that demonstrated community need or a request from a public health agency or community group was the basis for initiating or continuing the activity or program.
- The involvement of unrelated, collaborative tax-exempt or government organizations as partners in the activity or program carried out for the express purpose of improving community health."
Therefore, community need must be established in order to report a community health improvement activity (or donation for a health improvement activity) but it does not need to be including in your community health need assessment.
(October 2008; revised November 2008; revised January 2011; revised February 2014; updated August 2021; updated July 2022)
Please Take Note: The information provided does not constitute legal or tax advice. The material is provided for informational/educational purposes only. Please consult with counsel regarding your organization's particular circumstances.