Start with the self-dealing rules. When a private foundation pays for a sponsorship or receives complimentary tickets, those tickets become foundation assets. If a board member, officer, substantial donor, or family member (all “disqualified persons”) uses them for food, entertainment, or marketing perks, the IRS may treat it as self-dealing and impose excise taxes.
3 Simple Ways to Handle Sponsorship Requests
- Say No to All Sponsorships
Some foundations choose not to fund any event sponsorships or tickets. It’s the easiest way to stay compliant with IRS rules and ensure a consistent response to all requests. - Make a Grant, but Decline the Perks
If you want to support the event, consider making a grant equal to the charitable portion of the ticket or table, but formally decline any benefits like seats, meals, or logo placement. This avoids self-dealing risks. - Attend with Caution
If board or staff need to attend for a clear programmatic reason, the foundation can pay the charitable portion as a grant. Anyone attending should personally pay for the non-charitable portion (like the value of a meal or entertainment), and the foundation should document why attendance is necessary.
Policy Tips for Lean Foundations
- Put it in writing. A short board-approved policy that covers “tickets, tables, and sponsorships” makes decisions consistent and defensible.
- Track and document. Keep copies of sponsorship letters, acknowledgments, and any reimbursements so you can show the charitable/non-charitable split.
- Use Form 990-PF correctly. Report any excess-benefit reimbursements and keep carry-forward records if you convert the entire cost to a charitable grant.
- Leverage public charities when helpful. If the donor-family wants visibility, consider making the sponsorship through a donor-advised fund or community foundation; the self-dealing rules are far less restrictive for public charities.
- Stay current. IRS enforcement attention on fundraiser tickets has increased in recent years, and the 2025 Form 990-PF instructions highlight tickets as a common audit trigger.
Bottom Line
A foundation is never penalized for saying no to sponsorships. If you do wish to say yes, reject any personal benefits or have disqualified persons pay for them. Otherwise the “free” ticket could cost your foundation significant excise taxes.
Further Reading
- Exponent Philanthropy, “How to Avoid Self-Dealing”
- Foundation Source, “Avoid the Compliance Pitfalls of Fundraisers and Galas”
Still have questions?
Members can access staff experts through our Q&A service by calling 202-580-6560, or post a question to the member community to hear form peers in the field.
Explore our Q&A archive