Contents

§ 23.3 CORPORATE SPONSORSHIP RULESpayment is contingent on an event actually taking place or being broadcast, inand of itself, does not, however, cause the payment to fail to qualify. Also, meredistribution or display of a sponsor’s products by the sponsor or the exemptorganization to the general public at a sponsored event, whether for free or forremuneration, is considered a “use or acknowledgment” of the sponsor’s productlines—not advertising. 39This law does not apply to a payment that entitles the payor to the use oracknowledgment of the name or logo (or product line) of the payor’s trade orbusiness in a tax-exempt organization’s periodical. A periodical is regularlyscheduled and printed material published by or on behalf of the payee organizationthat is not related to and primarily distributed in connection with a specificevent conducted by the payee organization. 40 Thus, the exclusion does not applyto payments that lead to acknowledgments in a monthly journal, but it doesapply if a sponsor receives an acknowledgment in a program or brochure distributedat a sponsored event. 41 The term qualified sponsorship payment also doesnot include a payment made in connection with a qualified convention or tradeshow activity. 42To the extent that a portion of a payment would (if made as a separate payment)be a qualified sponsorship payment, that portion of the payment is treatedas a separate payment. 43 Therefore, if a sponsorship payment made to a tax-exemptorganization entitles the sponsor to product advertising and use or acknowledgmentof the sponsor’s name or logo by the organization, the unrelated businessincome tax does not apply to the amount of the payment that exceeds the fair marketvalue of the product advertising provided to the sponsor. 44The provision of facilities, services, or other privileges by an exempt organizationto a sponsor or the sponsor’s designees (such as complimentary tickets,pro-am playing spots in golf tournaments, or receptions for major donors) inconnection with a sponsorship payment does not affect the determination ofwhether the payment is a qualified one. Instead, the provision of the goods orservices is evaluated as a separate transaction in determining whether the organizationhas unrelated business income from the event. In general, if the servicesor facilities do not constitute a substantial return benefit (or if the provision ofthe services or facilities is a related business activity), the payments attributableto them are not subject to the unrelated business income tax. 45Likewise, a sponsor’s receipt of a license to use an intangible asset (such as atrademark, logo, or designation) of the tax-exempt organization is treated asseparate from the qualified sponsorship transaction in determining whether theorganization has unrelated business taxable income. 4639 H. Rep. No. 105-220, 105th Cong., 1st Sess. 69 (1997).40 IRC § 513(i)(2)(B)(ii)(I).41 H. Rep. No. 105-220, 105th Cong., 1st Sess. 69 (1997).42 IRC § 513(i)(2)(B)(ii)(II).43 IRC § 513(i)(3).44 H. Rep. No. 105-220, 105th Cong., 1st Sess. 69 (1997).45 Id.46 Id. 625