What's Wrong With Including Advertising in Your Nonprofit Newsletter?
One of my readers asked this question:
"Can a 501(c)(3) Nonprofit sell ads in a newsletter or charge a subscription fee?
"My organization is looking for a way to offset some of the printing costs, so a board member suggested allowing outsiders, stores, vendors, etc. to buy ad space.
"We've also thought of possibly selling subscriptions to the newsletter, rather than continuing to offer it free to members and donors. Could we do that?"
These are good questions, and they involve a couple of issues. One is what purpose do you want your newsletter to serve, and the other is about unrelated business income.
Unrelated business activity could apply to both the advertising and the subscription model you are considering. Here is our article about the ins and outs of related and unrelated business income.
Selling ads for your newsletter would likely be considered unrelated revenue and could subject your organization to the UBIT (Unrelated Business Income Tax).
A Better Alternative - Sponsorship
An alternative might be to let local businesses sponsor your newsletter. You could solicit several businesses with your sponsorship proposal.
The sponsorship fee could qualify as a business expense for the sponsor, but the company would benefit from the fact that it is supporting a charitable cause.
As an example, check out the sponsorship offer that Board Source offers for its newsletter.
As for charging a subscription for your newsletter, it probably would not work unless your newsletter provides information that is really needed by your readers.
For example, the Smithsonian sells subscriptions to its magazine and accepts advertising. The magazine publishes articles about the topics the Smithsonian museums research and/or exhibit. Charging a subscription will likely be considered mission-related.
But most nonprofit newsletters do not fall into this category.
Charity newsletters are primarily used to help supporters stay informed about the organization's activities and to encourage more donations. Charging a subscription is more likely to turn people off than get them on board.
Overall, I think that a newsletter is much more valuable for most nonprofits as a way to keep donors than turning it into a profit center. Consider your newsletter, whether it goes our by email or through the mail, part of your campaign to keep your donors for life.
However, charging a subscription or selling advertising depends on the nature of your organization and the content that you include in a magazine or newsletter.
For a definitive opinion, be sure to consult with your accountant or an attorney well versed in nonprofit law
For advice on retaining donors with newsletters, see E-Newsletters That Make People Click Donate.
Tom Ahern's book, "Making Money with Donor Newsletters," should also be on your bookshelf.