18 May 2010 / 1 ReTweet

Does the IRS Want to Restrict Nonprofits Use of Social Media?

Seal of the United States Internal Revenue Ser...
Image via Wikipedia

Social media provides the perfect platform for nonprofits to engage with the public and raise awareness for their cause. There are many successful case studies of nonprofits utilizing social media to help raise public awareness, and in doing so successfully fundraising without the large advertising budget that might be necessary in traditional marketing.  I am one of the founding members of a social media group here in Orange County, California, #ConnectOC, that hosts events for the dual purpose of connecting professionals and raising awareness (combined with fundraising) for nonprofits.

Is there anything in this picture that the IRS might object to?

Today’s post is inspired by another person I met Windmill Networking, Shirley Ayres.  Shirley does consulting for social workers and social care in the United Kingdom, and we immediately started a conversation about the need to convince public organizations about the potential good for social media.  Shirley contacted me again yesterday with a surprising issue that she felt, and I agree, we need to raise public awareness on: the potential that the IRS will not allow nonprofits to freely participate in social media.

Let me explain further.  Shirley started a discussion on a LinkedIn Group asking those in the group to respond to a poll about whether or not nonprofits have a social media usage policy.  To her surprise, there was a gentleman from the U.S. who posted the following comment:

My organization recently went through an IRS audit and was heavily scrutinized for having web linkages to various social media outlets (facebook, twitter, youtube, etc), despite them being dedicated to the non-profits purpose. The IRS agent’s position was that these social media tools distract from the non-profit purpose and create two issues…first is that these media outlets may fall within the scope of advocacy, and second is possible inurement from whomever is responsible for keeping the media outlets up to date with information. We got through the audit ok, but with the condition that we no longer use social media as a primary source for communication and dissemination of our work.

You can imagine how shocked both Shirley, and subsequently myself, were after reading this.  As this comment was in a LinkedIn Group with a real professional profile attached to it, it begs to say that this story is probably not a lie.

Apparently the above organization got through the audit OK, but the condition was that they could no longer use social media as their primary source for communication.  If the ideal place for nonprofits to freely and deeply engage with the public cannot be used as their primary source for communication, what could take its place?

I have never worked at a nonprofit so I do not understand the potential intricacies regarding nonprofit status and the tax code, but my knee-jerk reaction is that there is something terribly wrong here.

What do you think about this?  Does your nonprofit organization have similar experiences with the IRS?  Any authorities on taxes and nonprofits want to weigh in on the issue?  Please help contribute to our understanding of this issue!  Thanks!

Related articles by Zemanta
Reblog this post [with Zemanta]

If you enjoyed this article, sign up for my newsletter and get FREE chapters from Neal's Books!

  • Pingback: Ryon Harms

  • Pingback: McDermott & Bull

  • Pingback: McDermott & Bull

  • Pingback: Tim Tyrell-Smith

  • Pingback: Kevin Liebl

  • Pingback: Margo Rose

  • Pingback: Robin Moss

  • Pingback: Norman Naylor

  • Pingback: Katherine Tillotson

  • ambercleveland

    This is really shocking and indicative of the fact that the government needs to catch up to the times. What is an appropriate primary source of communication? The mail? Email? Your own website? Social Media expedites the process and allows outreach to the target audience of any business (non-profit or other). The IRS should not force non-profits to ignore advances in technology and Marketing. Especially when the President is embracing Social Media.

    This negatively impacts a non-profits ability to effectively outreach to their constituents. AND probably will cause a negative impact on $ to cause v. $ to overhead ratio. If a non-profit is forced to use traditional channels, costs can be significantly higher. Really unfortunate policy, how can we change it?

  • http://www.sloperesources.com/blog/ Joe Brown

    Interesting story. I am not aware of — but would be very interested in — any specific IRS regulations with regard to nonprofit organizations’ usage of social media. I don’t mean to cast doubt on the gentleman’s story at all, but do feel that we are quite limited in assessing the significance — and potential impact — without knowing the details of how the organization in question was using social media. It may be that there were specifics of their usage that raised red flags for the IRS, rather than the tax agency having a blanket policy against social media. The fact that both advocacy and inurement were raised as potential issues does suggest that the IRS was operating within its scope, and makes me that much more curious about the specifics of the case. Can you possibly point us to a link to the LinkedIn discussion that might help shed more light or allow further exploration of this story?

  • http://windmillnetworking.com/ nealschaffer

    Agree 100%…that is why the minute I found about it I felt it was important to blog about it to raise awareness. I trust that you will help in this effort as well. Let's keep each other posted on how this proceeds…

  • Pingback: Amber Cleveland

  • Pingback: When to Use Traditional Vs. Social Media Marketing | Pro Sulum, LLC

  • http://windmillnetworking.com/ nealschaffer

    Hi Joe,

    Thanks for the comment. You need to be a member of the LinkedIn Group to access the discussion, but I did receive this additional information which hopefully will shine some more light on the matter at hand:

    “To add to my story…the IRS agent that I worked with through the audit did recognize that social media was “an issue the IRS needed to address” as he recognized that this is a mainstream communications channel. I ended up citing several examples of organizations within my community and line of work that also use social media, and he raised an eyebrow…apparently the IRS has had a blind eye to the issue for some time. I'd suspect this is to the non-profit worlds advantage, as they cannot possible stop social networking/media from taking place in the non-profit sector. My agent's supervisor actually suggested that our 501(c)3 status be revoked given how heavily we use(d) social media! The principle issue was perceived inurement…my activities and communications as Exec Director were front and center continuously (we are a very small org, with all daily operations falling on my desk) and the IRS considered this more beneficial to me (unsalaried mind you) than to the org.”

    @NealSchaffer

  • http://windmillnetworking.com/ nealschaffer

    Hi Joe,

    Thanks for the comment. You need to be a member of the LinkedIn Group to access the discussion, but I did receive this additional information which hopefully will shine some more light on the matter at hand:

    “To add to my story…the IRS agent that I worked with through the audit did recognize that social media was “an issue the IRS needed to address” as he recognized that this is a mainstream communications channel. I ended up citing several examples of organizations within my community and line of work that also use social media, and he raised an eyebrow…apparently the IRS has had a blind eye to the issue for some time. I'd suspect this is to the non-profit worlds advantage, as they cannot possible stop social networking/media from taking place in the non-profit sector. My agent's supervisor actually suggested that our 501(c)3 status be revoked given how heavily we use(d) social media! The principle issue was perceived inurement…my activities and communications as Exec Director were front and center continuously (we are a very small org, with all daily operations falling on my desk) and the IRS considered this more beneficial to me (unsalaried mind you) than to the org.”

    @NealSchaffer

  • Pingback: When to Use Traditional Vs. Social Media Marketing

Windmills Marketing, 14271 Jeffrey Rd., Suite 177, Irvine, CA 92620 | (888) 541-3429 | neal@windmillnetworking.com