Charity Crisis

Four Ways To Avoid a Nonprofit PR Crisis

Ronn Torossian helps keep you compliant

For a well-meaning charity there is nothing quite so bad as accidentally making a financially fatal mistake. You may have never intended to cross a legal or ethical line, but once it’s crossed, you end up with both a financial and public relations crisis that will damage your public reputation and could destroy the good work you want to accomplish.

Ronn Torossian, CEO of 5W Public Relations and president of the Ronn Torossian Foundation, has four tips to help you stay on the right side of the law and keep you out of a public relations crisis.

The purpose of this article is not to offer legal counsel. Torossian is only offering advice as a friend and fellow charity worker who wants to help any who wish to do good in their communities.

Disclaimer aside, these are traps I have seen more than a few good nonprofits fall into, and we want to help you avoid them.

#1 – State and local tax issues

While some charities are exempt from sales tax, this exemption may not apply to your organization, particularly in certain situations. Want to feed a large number of people at a fundraiser or other special event? You need to be very familiar with the tax laws that may apply. Also, you need to understand the usage statutes and budget for an intended or special use permit as necessary. This is not the time to get forgiveness instead of permission, but charities try it every day.

#2 – Unrelated Business Income Tax (UBIT) pitfalls

This is one of those most folks never think about. But if, for example, a food or beverage provider sponsors your event and is, in turn, the only food and/or beverage provider at that event, their sponsorship payment could constitute UBI. Another potential UBI issue could happen when a charity swaps web links with a sponsor and THEN goes beyond simply listing the logo and sponsor name. Making substantive or qualitative statements about a sponsor could indicate UBI.

#3 – Federal “deductibility”

Okay, this is a big one. It’s the first question the average donor asks when giving to a nonprofit. “Is this tax deductible?” The issue is rarely IF the donation is deductible but whether or not the charity gives “fair and equitable value.” Donors should only deduct the amount paid and the value received. (PS – This one has a lot of variables.)

#4 – Gambling and games of chance

Poker tournaments, casino nights, raffles, bingo – these are fun and profitable ways for most charities to increase their income. However, different states have different laws about this in general and, in many cases, on a game-by-game basis. You need to know not just what the law says in your state, but how it has been interpreted and applied. Don’t let a misreading or a misunderstanding derail your good work.

The content of this article is in no way meant to convey or represent legal counsel. Ronn Torossian is not an attorney and laws in your area may differ.