Can a LPFM (or NCE) station carry commercials on their internet stream while running compliant underwriting acknowledgements over the air?

From an FCC perspective, the answer is yes.  The FCC only cares about what goes over the FM frequency and not on an internet stream. 

Advertising  messages on a stream can be handled one of two ways.  In-stream advertising is where the automation is triggered to play a different message for stream listeners than what is played over the air and at the conclusion of the break, both  the stream and over the air return to regular programming.  Advertising on a stream can also be done through a "pre roll" message where the advertising plays as the stream connects and then switches you directly into the programming.  This is similar to the pre-roll advertising that is done by Tune-In, You Tube and other providers.  

The concept of doing "opt out/in-stream" and "pre roll" advertising though could have other consequences that should be taken into consideration before attempting to do such programming.

Length of the opt out break for commercials vs. underwriting message lengths

Normally, commercials are 30 or 60 seconds in length where compliant underwriting announcements are usually much shorter.  While the FCC does not specify a time limit on an underwriting acknowledgement,  the FCC has stated in previous cases that longer underwriting announcements can be problematic because they stand more of a chance of crossing the line between acknowledging and promoting.   An underwriting message should include the underwriter's name, a non-promotional description of their business or a limited description of product lines, location information and contact information.  That can be pretty much done in less than 15 seconds. 

Opt out commercials are subject to more scruitny from other broadcasters

Stations that do opt outs to run full commercials on their streams may be subject to complaints and petitions to deny renewals from competing broadcasters in the area.  We have already seen a few cases where an LPFM or NCE station was accused of running commercials and it turned out that the commercials only ran on the stream.  Answering these types of complaints takes resources from the LPFM/NCE station that can be better used elsewhere.   In addition, it may also involve incurring expenses for an attorney to best represent the interests of the LPFM/NCE station.  

It is vitallyimportant that if your station runs these opt out messages that the station keeps a log that includes the time of the break, what was carried on the internet stream and what was carried on the FM air at the same time. 

Potential risk to the organization's non-profit status

While we are not giving legal advice here, some activities related to for-profit activities by a nonprofit organization could violate federal or state laws.  This is especially the case where the advertising is for political candidates for public office and ballot measures.  You will also need to check with an attorney or a certified public accountant who is knowledgable on nonprofit law and regulations on how running such commercials will impact the organization's nonprofit status.  Again, we can't give that advice here, but it is something you need to take into consideration. 

Possible violation of music licensing or streaming provider's TOS

One other thing to consider is whether the music licensing performance rights organizations (ASCAP, BMI, SESAC and SoundExchange) will permit commercial advertising with the type of license that the station holds or in cases that involve aggregated licensing, like Live365, if such messages can be carried in compliance with their Terms of Service (TOS).    We are not experts on this subject, but that is something that you need to take into consideration.

Any questions should be referred to your attorney for legal advice.