ANSWER: Paid advertisements in PTA publications or websites are subject to UBIT (unrelated business income tax). It is not, however, subject to UBIT to thank sponsors by putting their link in your website or mentioning them in your printed materials. The basic distinction between purchasing ad space and sponsoring is intent. When someone is wanting to purchase ad space, their intent is purely to advertise their business. When someone has provided a sponsorship, their intent is to support the association. The ad space that results is purely a thank you gesture for the gift.
Here’s an example of this distinction:
· Advertising is “eat at Joe’s Cafe, their food and service is the best”
· Thanking a sponsor is “here’s a list of our sponsors for the art event: Joe’s Café and QFC”
PTA’s would definitely want to avoid personal recommendations that would give a preference to one business over another. In other words, PTAs should be very clear not to imply an endorsement of any business, product or service – whether for an advertiser or a sponsor. Using the previous example, if you run an ad then you need to make it clear that is a paid advertisement and not an endorsement.
To avoid the perception of an endorsement of sponsors, add the verbiage “thank you to our generous sponsors for their support” before listing and linking to the sponsors websites. By doing so, you are telling people that you received sponsorship funds from these companies, but are not making a recommendation that members use these businesses.