Nonprofit Law/Personal ads on non profit emails
Someone in our nonprofit organization said it is illegal for our president, when sending members notices has at the bottom, a blurb about her offering classes and workshops (for her profit). Our bylaws has no provision for either doing or not doing this. Thank you for your input
I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. Therefore, I am assuming you are referring to such an organization.
Her email notices to the members are official communications from the nonprofit organization and she should not be using the valuable mailing list of the organization for her own private benefit.
Internal Revenue Code section 501(c)(3) which is available at http://goo.gl/7lFll
(on page 2, first column) provides, in part, that the 501(c)(3) organization must be "operated exclusively for
religious, charitable ...or educational purposes ... no part of the net earnings of which inures to the benefit of any private shareholder or individual".
The term "private shareholder or individual" is defined in regulations 26 C.F.R. 1.501(a)-1(c) "The words `private shareholder or individual' in section 501 refer to persons having a personal and private interest in the activities of the organization."
on the right column of page 2
The IRS has written that one who controls is also an insider. "The first key is that inurement applies to those who are 'inside,' or in control, of the organization..."
A President has some authority and, therefore, is such an insider. Inurement (benefits to insiders) is discussed by the IRS at http://www.irs.gov/pub/irs-tege/eotopicc90.pdf
and specifically note, on the bottom of page 10, "even a minimal amount of inurement can result in disqualification for exempt status, whereas private benefit must be substantial in order to jeopardize exempt status."
By allowing that private activity of the President to continue, the organization jeopardizes its exempt status because it is allowing a substantial non-exempt activity to continue.
I am assuming that the President is using her own email account and not any email service that is being paid for by the nonprofit organization. I am also assuming that, in the email messages, in which she is mixing in solicitations for her for-profit business, it is clear in the email that she is soliciting for her own business which is a business separate from the nonprofit organization's business.
It would appear that the benefit she gets from the private messages within the mailings to the members could very well be substantial, in terms of her new business, and substantial as to the value of the free advertising. Therefore, the Board should inform her that she may no longer include her private solicitations within the notices of the organization to the members and may not use the organization's mailing list for her own benefit without the approval by the Board. Some nonprofit organization's do "lease" their mailing lists for a fee and your organization would need to decide if it wants to engage in such leasing activities.
The State of Texas may provide some protection to members of nonprofits, under privacy laws. The state may want to protect such members from private solicitations from people who have access to the mailing list of the corporation. Let me know if the nonprofit organization is a Texas Nonprofit Corporation and, if it is not, what type of entity it is. After you give me that information I will reply further. As I explained this forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations but I may be able to direct you as to the state's laws.
Attorney at Law
P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.