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Nonprofit Law/Non profit mailing


I operate a 501c3 and have questions about the sale of information.
We are mailing out a report that allows medicare recipients to learn about saving money on their Medicare Supplement. We want to offer the senior access to a preferred expert who can give them a quote on the medicare insurance.
We want to disclose in our report that the quote service is available and that the agent is not affiliated with our non profit.
We will charge the agent a referral fee.

Is it legal for a non profit to provide this service and then if requested by the client sell this information to a third party outside of the non profit

I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. Most of the issues that you raised are controlled by state law and states may differ somewhat with how they would treat such issues. Even though this forum is not for such state law issues, I can advise you that, generally, states do regulate any advertisements as to the sale of insurance products and you can check with your State's Insurance Department.  You may simply have to put a disclaimer in your "report" stating that you are not soliciting insurance business, but you would need to check with the relevant states' insurance departments.

As to the IRS, which is what I deal with on the free forum, the referral fees that you would be receiving from the agent are what the IRS calls unrelated business income which is generally taxable. IRS ublication 598 "Tax on Unrelated Business Income of Exempt Organizations" at
explains that,  if products or services are not directly related to the charitable, educational, religious or other purpose or function constituting the basis for its exemption (other than for production of income), then the activities are generally taxable.  For more details you can read that Publication. The IRS has declared, "Nonprofit organizations that are granted Federal tax exemption based on their mission-related purposes are allowed by the IRS, within certain limits, to generate income
from unrelated business activities." on pdf page 1. But, the
organization could, if it has more unrelated activities than the IRS's vague "certain limit", be jeopardizing its exemption depending upon the facts and circumstances. Two of the main factors is the gross income of the activity in relation to the gross income of the organization's total income and staff time spent on the activity.

Court cases reveal that  15%-20% or more can jeopardize exempt status.

Harvey Mechanic
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.

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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