Understanding Nonprofit Marketing Laws: 5 Considerations

Nonprofit organizations depend on donors and volunteers to source the funds necessary to run their operations. To achieve this, they deploy marketing strategies similar to what every other business would use. However, nonprofit marketing follows specific rules and regulations that dictate how advertising and fundraising should be conducted.

Whether you’re looking for accessibility standards to build an inclusive website or grant management tips, understanding nonprofit marketing laws is essential to raising awareness and support. Let’s explore five legal considerations to keep in mind for your nonprofit’s next marketing campaign.

1. Understand the Legal Landscape

Nonprofit marketing is governed by a couple of legal provisions that oversee advertising and marketing disclosures, contract requirements, federal taxes, and more. At the state level, some laws govern fundraiser events, and some oversee data privacy and security. For example, nonprofits need to follow email and anti-spam laws when communicating with donors and volunteers.

Additionally, the Better Business Bureau (BBB) Standards are rules designed to help donors make sound decisions when contributing to a charitable cause. By meeting these standards, your nonprofit can earn the BBB Accredited Charity Seal, which encourages public confidence and demonstrates that you use honest and fair solicitation practices.

One of the rules specific to nonprofit marketing is standard #19, which requires marketers to disclose how the charity benefits from product or service sales. This rule requires mentioning the percentage or flat amount that will go directly to the charity and whether or not the customer’s actions will influence the amount directed to the organization.

Understanding the legal landscape and complying with all the laws requires expert advice. It’s always advisable to work with competent legal consultants to help you and your marketing partner(s) stay compliant and avoid federal and state enforcement actions.

2. Avoid Misleading the Audience

When running a nonprofit marketing campaign, some pieces of information must be transparent and readily available to the audience. For instance, the adverts should be clear on how the raised amount will be used and how much or what percentage of sales proceeds will go to charity.

At the point of sale, it’s recommended to disclose the following information:

• The amount to donate/donated per purchase
• The length or period of the campaign
• The minimum or maximum guaranteed contribution to the charity, if any
• Donation capitalization, if any
• Additional requirements or restrictions, if any

Similarly, you want to avoid unintended endorsements for any reason, as this can violate specific state laws governing charitable activities. Using a charity’s brand elements, such as its logo, name, or slogan while selling a commercial product online may mislead customers to think that the charity has endorsed that particular product when in reality, it has not. A rule of thumb is to avoid any tricks intended to boost the sales of products that a charity does not endorse.

3. Transparently Describe Your Fundraising Processes

Along the same lines of explaining how donations will be used, nonprofits must also maintain transparency about their fundraising processes, including:

• Matching gifts: Add a descriptive matching gift page to your website with all the details donors need to know, including how to check their eligibility and submit a match request. You can even include an employer search tool so that donors can check their eligibility directly from your page.
• Annual giving: Explain your annual giving program and list the ongoing activities that it funds. Emphasize the impact these gifts make on your mission, providing examples of what your organization has accomplished in the past using this funding.
• Planned gifts: Define planned giving and explain the different types of gifts, such as bequests or charitable gift annuities. Be careful to use respectful language and a tactful tone when discussing the sensitive nature of the topic.
• Crypto donations: Explain what cryptocurrency is and the process for donating it to your nonprofit. Clearly lay out your organization’s plan for using the crypto donation and the various benefits such a donation has for donors.

Transparency isn’t just a nonprofit marketing law; it’s an effective way to bolster donor trust and encourage donations. Donors must know what’s being asked of them to give effectively. They’ll be more willing to give when the process is simple and easy to understand.

4. Follow Specific Program Guidelines

Depending on the specific marketing tools and programs a nonprofit uses, certain regulations may be in place to ensure the resources are used properly.

For example, the Google Ad Grant is a popular marketing opportunity that equips over 65,000 eligible organizations with $10,000 in ad credits each month. Google’s program enforces the following guidelines to ensure nonprofits make the most of the funding:

• Keyword rules dictating how ad keywords should be chosen
• Audience engagement guidelines to determine ad effectiveness
• Account structure policies regarding how many ad groups, ads, and ad extensions an account should maintain
• A feedback requirement that asks participants to submit an annual survey

Similarly, foundation or government grants often come with their own set of restrictions. For instance, organizations are often required to use the grant funding for a specific purpose and report progress updates regularly to the grantor. All relevant regulations should be detailed in the grant agreement, so your marketing team should carefully read the agreement before further engaging with the program.

5. Adhere to Laws Regarding For-Profit Engagement

Any business that partners with a charitable organization to drive sales of products or services (which will benefit a charitable cause) must register and file campaigns and contract reports, as dictated by the host state.

Businesses engaging in charitable sales promotions must comply with reporting and registration provisions in up to seven states. When conducting cause marketing campaigns online, the regulatory framework changes. You’ll need to talk with your lawyer to ascertain which states have jurisdiction over your online cause marketing campaigns.

You should create a written contract that will entail all your marketing partnerships and a share of proceeds from the sales efforts. The agreement should define:

• The products or services offered
• The territory or geographic location of the campaign
• How the donation is triggered and the amount that goes to charity — either a flat fee or a percentage of the total amount
• The campaign period

Also, when a charity organization endorses products or services from a particular company, the sales or payments made may be subject to a special tax called the unrelated business income tax (UBIT). Often, tax-exempt organizations are allowed to conduct specific amounts of unrelated business activities, and a decision to incur UBIT should be informed. For an action to attract this tax, it must meet the following requirements:

• It’s a trade or business.
• It's carried on regularly.
• It's not substantially related to furthering the exempt purpose of the organization.

A charitable organization that has earned 501(c)(3) determination and is actively engaged in unrelated business activity attracts up to a 37% (UBIT) tax rate.

The Gist

Every nonprofit organization, at some point, will promote its cause, work, and fundraising needs. Whether this involves applying for grants or partnering with a business, it’s crucial to understand the various federal and state laws that may affect your marketing campaign.

Just as you should adhere to nonprofit marketing laws, ensure the tools you use support a compliant and smooth marketing process. Easy-to-use marketing tools support compliance by simplifying the process of creating engaging marketing materials. That way, your organization can focus on following the right rules while your tools do the rest.

Author: Ben Gonzalez graduated from the UC Berkeley School of Law in 2013. Shortly after graduation, he worked as a paralegal until 2017, where he gained insightful knowledge used in his legal writing process. Ben is currently a freelance lawyer and enjoys writing in his free time. He is a proud California resident located in San Francisco.