The IRS will look at the payment made to a nonprofit by a corporate sponsor and decide whether the payment is a tax-free gift (charitable contribution) or a taxable advertising payment. The IRS focuses on whether the corporate sponsor has any expectation that it will receive a “substantial return benefit” for its payment. If so, the payment will result in taxable income for the nonprofit that is reported on IRS Form 990-T. (See rules described in Internal Revenue Code, Section 513(i).)
View more details from the National Council of Nonprofits.