For galas, golf outings, 5Ks, festivals and youth sports
Sponsorship acknowledgment letters: thanking business sponsors without turning the money into advertising
A business sponsor is the one donor whose letter has to do two jobs. It must give the company what it needs to deduct the payment, and it must describe what the company got back carefully enough that the payment stays a tax-free "qualified sponsorship payment" for your nonprofit rather than taxable advertising income. The rules are in Section 513(i) and they are simpler than they sound: name and logo are fine, superlatives and prices are not, and anything else the sponsor receives gets a value.
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What the sponsor received, and what the letter should say
| Sponsor received | Acknowledgment or benefit? | What your letter says |
|---|---|---|
| Name and logo on banners, T-shirts, the program, your website, a "presented by" line | Acknowledgment — not a good or service | Describe the placement; state that no other goods or services were provided |
| "Official sponsor" or "exclusive sponsor" title | Acknowledgment | Same as above; exclusivity of sponsorship is fine |
| Exclusive provider rights (only their drinks sold at the event) | Substantial return benefit | Describe it and state a good-faith value; the rest may be a gift |
| Tickets, a table, a foursome, meals, swag worth more than 2% of the payment | Quid pro quo benefit | Describe the items and state their fair market value; only the excess is deductible |
| Tickets or swag worth 2% or less of the payment | Disregarded | May state that no other goods or services were provided |
| A program ad with prices, "best in town", "mention this ad for 10% off" | Advertising — taxable to you, business expense to them | Describe the advertising and its value as goods or services; track it as unrelated business income |
| Payment that depends on attendance, ratings or sales | Not a qualified sponsorship payment | Treat it as a fee for services; no charitable-contribution language |
| Printing, food, venue, prizes provided in kind | In-kind sponsorship | In-kind letter: describe the items, no value; services are not deductible |
| Gift cards or merchandise donated as raffle or auction prizes | In-kind property | Describe; no value. The raffle buyer gets no deduction at all |
The two-percent figure comes from the regulations under Section 513(i): return benefits other than the acknowledgment itself are disregarded if their total fair market value does not exceed 2% of the sponsorship payment. On a $5,000 sponsorship that is $100 of tickets or swag. Above it, the entire value of the benefits is a quid pro quo and must be disclosed.
The acknowledgment vs. advertising line, in one list
Safe to print or say about a sponsor: company name, logo, established slogan (if it has no superlatives), product or service lines, address, phone, website, "sponsored by", "official sponsor", sponsorship level, a plain link.
Turns it into advertising: qualitative or comparative words ("best", "leading", "#1"), prices, discounts or "value" claims, endorsements by your organization ("we trust them with our own books"), and any inducement to buy ("call today", "mention this ad").
This matters for two reasons. Advertising income can be unrelated business taxable income for your nonprofit (Form 990-T once gross unrelated income reaches $1,000 in a year), and the sponsor then deducts the payment as marketing rather than as a gift. Neither is illegal; both are paperwork you probably do not want.
Sponsorship acknowledgment letter template
Keep the paragraph that matches what the sponsor received and delete the other.
[Organization legal name] [Mailing address] EIN [00-0000000] [Date] [Contact name] [Company name] [Company address] Dear [Contact first name], Thank you for [Company name]'s [Gold / Presenting / Hole] sponsorship of [Event or program name] on [Event date]. Your payment of $[Amount], received on [Date received], [covered the cost of / made it possible to] [one concrete thing it funded]. In recognition of your support, [Organization name] displayed [Company name]'s name and logo on [event banners, the printed program and our event web page]. Under IRS rules this acknowledgment of your sponsorship is not treated as a good or service provided to you. [Choose one:] No other goods or services were provided in exchange for this payment. [OR] In addition, [Company name] received [eight event tickets and a reserved table / a foursome and two carts], which we estimate at a good-faith fair market value of $[Value]. Only the portion of your payment that exceeds that value may be treated as a charitable contribution. [Organization name] is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code. Whether your business treats this payment as a charitable contribution or as a business expense is a question for your tax adviser; this letter provides the information needed either way. With thanks, [Signer name] [Title]
Safe sponsor wording for your program, banner or website
Identification only. Add nothing about quality, price or what attendees should do.
Our thanks to [Company name], [Level] sponsor of [Event name]. [Company logo] · [Company name] · [City, State] · [website address]
Sponsors, ticket buyers and donors from one event spreadsheet
Put every event payment in one sheet with Name, Date, Amount and a Goods value column (the fair market value of the table, foursome or dinner each payer received; leave it blank or 0 for pure gifts and logo-only sponsors). The generator writes the correct goods-or-services sentence for each row, limits the deductible amount automatically, and exports a PDF, Word file or mail-merge CSV so sponsors and donors get their letters in the same pass.
Sponsorship letter questions
Is a business sponsorship tax-deductible for the sponsor?
Usually yes, one way or the other. A sponsor that receives nothing substantial back can treat the payment as a charitable contribution under Section 170 (corporations are limited to 10% of taxable income). A sponsor that receives advertising can deduct the payment as an ordinary business expense under Section 162 instead. Which one applies is the sponsor's and their accountant's call, so the nonprofit's letter should simply state the facts: amount, date, what was displayed, and the value of anything else the sponsor received.
Do we have to send a sponsor an acknowledgment letter at all?
If the sponsor wants to claim a charitable deduction for $250 or more, yes: the same written acknowledgment rule applies to businesses as to individuals. And if the sponsor received goods or services worth more than the token amounts in exchange for a payment over $75, you are independently required to send a written disclosure of their fair market value. Since almost every sponsorship is over both thresholds, send a letter to every sponsor.
Does putting the sponsor's logo on a banner count as goods or services?
No. Under Section 513(i) and the regulations, displaying or acknowledging the sponsor's name, logo, product lines, slogans that have no qualitative or comparative language, address, phone number and website is a "use or acknowledgment," not a return benefit. Other benefits (tickets, meals, merchandise) are disregarded only if their total fair market value is 2% or less of the sponsorship payment; above that, the whole value of those benefits must be disclosed.
What is the difference between an acknowledgment and advertising?
Acknowledgment identifies the sponsor; advertising promotes it. Qualitative or comparative language ("the best", "award-winning"), price information or indications of savings or value, an endorsement, or an inducement to purchase, sell or use the sponsor's product turns the mention into advertising. "Thanks to Main Street Bakery, 123 Main St" is an acknowledgment. "Thanks to Main Street Bakery, home of the town's best sourdough, 10% off for attendees" is advertising.
Does our nonprofit owe tax on sponsorship income?
Qualified sponsorship payments are not unrelated business income, so a 501(c)(3) owes nothing on them. Payments for advertising can be unrelated business taxable income; if an organization's gross unrelated business income reaches $1,000 in a year it must file Form 990-T and may owe tax. Most small nonprofits stay clear of this simply by keeping sponsor mentions to name, logo and contact details.
Our sponsor got a table and tickets to the gala. How do we write the letter?
Thank them for the sponsorship, describe the logo placement as acknowledgment, then describe the table and tickets and state their good-faith fair market value (what a member of the public would pay for the same dinner and entertainment, not what it cost you). State that only the amount above that value may be a charitable contribution. If the value of those benefits is 2% or less of the payment, you may treat them as disregarded and say no other goods or services were provided.
The owner paid personally but wants the letter addressed to the company (or vice versa).
Address the acknowledgment to whoever actually made the payment, as shown on the check or card. Sole proprietors and single-member LLCs report business income on the owner's personal return anyway; for a corporation or partnership the payer matters. If a correction is needed, reissue the letter to the correct payer rather than issuing two.
Can we call them "the best plumber in town" in the program?
Not in the sponsor acknowledgment. Qualitative or comparative claims, prices and calls to action make the mention advertising, which can be taxable income to you and changes how the sponsor deducts the payment. Stick to name, logo, tagline without superlatives, address, phone and website. A link to the sponsor's site is fine; a link captioned "order now" is advertising.
The sponsor gave printing, food or a venue instead of cash.
That is an in-kind sponsorship. Describe what was provided and do not state a value; the sponsor determines fair market value for their own return. Donated services and the use of property (a free venue, free design work) are not deductible charitable contributions, though the provider's out-of-pocket costs may be a business expense for them. See the in-kind gifts page for the wording.
Should the letter mention the sponsorship level, such as Gold or Platinum?
Yes. Level names are fine and help the sponsor match the payment to their records. Just make sure the letter also states the dollar amount actually received, the date, what was displayed, and the value of any tickets or other benefits attached to that level, which is the part the IRS cares about.
General information based on Internal Revenue Code §170(f)(8), §6115 and §513(i), Treasury Regulation §1.513-4, and IRS Publication 1771. Not legal or tax advice; sponsors should confirm their own treatment with a tax adviser.