6-3.2 Step 2: Determine If Products Meet Statutory Provisions

6-3.2.1 Process

Determine whether all products to be mailed meet one of the three statutory provisions listed in 6-3.2.2. Consider the following two conditions and proceed as follows:

1. If one or more of the products do not meet any statutory provisions, the mailpiece is ineligible for mailing at the nonprofit prices.
2. If all products meet at least one statutory provision, go to step 3.

6-3.2.2 Three Statutory Product Provisions

For a product to be eligible for mailing at the nonprofit prices, it must meet one of the following three statutory provisions:

1. A low-cost item purchased or produced by the organization.
2. A gift or donation received by the authorized organization.
3. The organization’s own publication that meets the basic eligibility criteria for a Periodicals publication.

As explained in 6-1.4, the eligibility standards for products are different than those for advertisements for products and services. Unlike advertisements for products and services, it is irrelevant whether the product is substantially related to one or more of the authorized organization’s purposes or meets any of the other eligibility standards for advertisements. If the product meets one of these three statutory provisions, the product must still be examined to determine whether it contains advertising and whether the content-based restrictions for advertisements apply (steps 3 through 6).

6-3.2.3 Low-Cost Item

The determination of whether an item is considered a low-cost item — whether purchased or made by the organization — is based on the actual cost to the authorized organization or on whose behalf the product is distributed. If the organization subsequently resells the item, the price it seeks is irrelevant to whether it is considered to be “low cost” for purposes of this test.

The term low-cost item is defined in 26 U.S.C. 513(h)(2) of the Internal Revenue Code. Effective January 1, 2006, low-cost items were items costing no more than $8.60. At the beginning of each calendar year, the value of low-cost items is adjusted for changes in the cost of living. This information is published in the Internal Revenue Service’s Internal Revenue Bulletin and, subsequently, in the Postal Bulletin and the DMM.

Examples: Low-Cost Items

• Authorized organization A prepares a mailpiece that contains a paperback book bought for $3. The book is eligible for mailing at the nonprofit prices — if it does not contain ineligible advertisements — because it meets the statutory product provision for low-cost items. It is irrelevant whether the book is related to A’s primary purpose.
• Authorized university U buys books for $20 each and plans to mail them to alumni. The book is ineligible for mailing at the nonprofit prices because it does not meet the statutory product provision for low-cost items.
• Authorized college C buys for $3 each canvas tote bags bearing the college logo. College C plans to mail the tote bags to its alumni, each of whom pays the college $10 for the bag. The tote bag is eligible for the nonprofit prices because it meets the statutory product provision for low-cost items. The amount that an authorized organization pays for an item — not the amount at which the organization sells the item — determines whether an item is a low-cost item.
• Authorized fraternal organization F buys materials to make notebooks. The notebooks cost organization F about $2 each, including labor, materials, and overhead expenses, making it a low-cost item. (If an authorized organization makes the product itself, the costs incurred by the organization determine whether the product is a low-cost item.) The notebook is eligible for the nonprofit prices because it meets the statutory product provision for low-cost items.
• Authorized organization C sends a front-end premium — that is, a mailpiece that requests a donation and contains a box of greeting cards. The boxes of greeting cards cost the organization $3 each. The product is eligible for mailing at the nonprofit prices because it meets the statutory product provision for low-cost items.

6-3.2.4 Gift or Donated Item

To qualify as a gift or donated item, the item must be obtained by the authorized organization at no cost. The actual cost to the donor is not considered. If the authorized organization, however, directly or indirectly compensates a third party, the item may not be considered a gift or donated item.

Example: Donated Item

• Authorized organization C receives a donation of raincoats. The donor paid $15 for each raincoat. The raincoat is eligible for mailing at the nonprofit prices because it meets the statutory product provision for donated items even though the donor paid more than $8.60.

6-3.2.5 Periodical Publication

Periodical publications may be considered products if they are sold or have a listed price or represented value. By law, a periodical publication of an authorized organization is eligible for mailing at the nonprofit prices, provided that the publication does not contain an advertisement that is ineligible for mailing at these prices. To qualify as a periodical publication, the publication must meet the following criteria:

1. Have a title.
2. Be published at regular intervals of at least four times a year.
3. Be formed of printed sheets.
4. Have an identification statement.
5. Have a known office of publication.
6. Meet the eligibility requirements prescribed for one of the Periodicals categories (e.g., a general publication, a requester publication, or a publication of an institution or society).
7. Be eligible for mailing as USPS Marketing Mail matter.

A periodical may also qualify for mailing at the nonprofit prices as a product if it is a low-cost item or a donated item. Because most periodicals are likely to be low-cost items, consider that statutory provision first before examining the publication for the periodical publication criteria.

Example: Low-Cost Publication

• Authorized organization Q produces a publication twice a year that is available to subscribers at an annual price of $15. The publication contains no ineligible advertisements. The publication is considered a product because it is sold, but it does not meet the criteria for a periodical publication exemption because the publication is not published at least four times a year (see 6-3.2.5 for other requirements). Organization Q’s cost of producing the publication, however, is only $1 a copy. The publication is eligible for mailing at the nonprofit prices because it meets the statutory product provision for low-cost items.