Fundraising on the Web
The Internet has been a boon for nonprofit organizations. Charities hoping to raise awareness, and money, can now reach a worldwide audience with minimal expense.
Although the percentage of donating that is done online is still relatively small, the median share is just 2.1% of all private giving1, some organizations receive substantially more than that online. And many believe there is the potential for substantial growth.
Trends in Electronic Giving
Overall, the growth of charitable giving in 2012 was modest. According to the “Giving USA” report,2 donations in 2012 grew by 3.5% from 2011, or just 1.5% after adjusting for inflation. Despite that, the amount of online donations grew by 14% in 2012,1 and the number of online gifts grew by 20%.
Rules To Follow
It’s important to remember that the same IRS rules that apply to fundraising via traditional media also apply to Internet fundraising. Following are some of the top issues.
Deductibility disclosures. Not all tax-exempt organizations are eligible to receive tax-deductible donations. If your organization accepts donations online, you must clearly state on your web pages whether donations are tax deductible. You should also include that information on electronically generated receipts. If your group has applied for 501(c)(3) status but has not yet been recognized as tax exempt, you must indicate that contributions may not be tax deductible in a clear and conspicuous manner on your donation web page.
Third-party fees. If you employ professional fundraisers or other private parties to help with fundraising (traditional or Internet), the fees you pay must be reasonable and consistent with your 501(c)(3) status. They must not be excessive and cannot provide direct or indirect private benefit or private inurement (see sidebar).
Quid pro quo contributions. This one is easy to get wrong. A quid pro quo contribution occurs when your organization provides donors with something of value (goods or services) in return for their contributions. Quid pro quo contributions must be acknowledged in a very precise way. Donors must be provided with two things: a good faith estimate of the fair market value of the goods or services they received and a statement indicating that only the portion of the donation that was in excess of that value is tax deductible. Failure to disclose quid pro quo contributions of more than $75 could result in a penalty.
Logos and links. Be aware that if your organization posts Internet links to your sponsors’ or donors’ websites or displays their names, logos, or products on your website in return for their support, it could be construed as selling advertising and could generate unrelated business taxable income (UBTI). Selling merchandise online could also generate UBTI.
Reporting fundraising activities. You must include information about fundraising activities and expenses, including your online efforts, on your group’s annual Form 990 information return.