The “substantially related” standard does not apply to all mailings containing advertisements, as follows:
- The “substantially related” standard does not apply to advertisements for travel arrangements, insurance policies, and financial instruments (see step 4).
- The “substantially related standard” does not apply to other advertisements if the advertisement is part of material meeting the “content requirements for a periodical” (see step 5).
For each advertised product or service subject to the “substantially related” standard, consider the following two conditions:
- If all the products or services advertised in the mailpiece are substantially related to one or more of the authorized organization’s purposes, the advertisements are eligible for mailing at the nonprofit prices.
- If any product or service advertised in the mailpiece is not substantially related to one or more of the authorized organization’s purposes, the mailpiece is ineligible for mailing at the nonprofit prices.
An organization’s authorization is based on its primary purpose. Not all purposes shown in the organizational documents may be considered as qualifying purposes.
Except as set forth in 6-3.6.5, the determination whether a product or service complies with the substantially related standard is generally based on consideration of the nature of the product or service and qualifying purpose of the nonprofit organization. By law, the determination whether a product or service is substantially related to an organization’s qualifying purpose is based on provisions in the Internal Revenue Code and Standards established by the Internal Revenue Service and courts implementing those standards. If the organization is subject to the payment of unrelated business income tax (UBIT) on a product or service, it is not considered to be substantially related. However, the product may not be substantially related even if the organization is not subject to UBIT.
Since the determination whether a product or service is substantially related to an organization’s qualifying purposes is generally based upon nonpostal law and nonprofit organizations should generally be familiar with this law in order to fulfill their tax obligations, the Postal Service generally relies upon nonprofit organizations to make the determination. Accordingly, where a nonprofit certifies compliance with this requirement on its postage statement the Postal Service will accept the mailing subject to appropriate measures if the certification is erroneous. The Postal Service urges nonprofits to consult with tax advisers or other appropriate parties as needed to ensure the accuracy of their certifications.
Some advertising is considered substantially related to the organization’s purposes, regardless of the specific nature of the product or service.
Advertisements for products and services, including products and services offered as prizes or premiums, are considered substantially related if the products and services are received by the authorized organization as gifts or contributions. Also, announcements of activities (e.g., bake sale, car wash, charity auction, oratorical contest) are considered substantially related if substantially all the work is conducted by the members or supporters of the organization without compensation.
Example: Substantially Related Advertisements
