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Sponsorship and advertising dollars can provide a real boost to your not-for-profit organization\u2019s income. However, if sponsors or advertisers receive a \u201csubstantial benefit\u201d or if providing benefits isn\u2019t a related business activity, you may owe unrelated business income tax (UBIT) on the payments. Here\u2019s a quick look at what is and isn\u2019t taxable.<\/p>\n
UBIT typically doesn\u2019t<\/em> apply to sponsorships<\/strong><\/p>\n Sponsorship dollars generally aren\u2019t taxed. Qualified sponsorship payments are made by a person engaged in a trade or business with no arrangement to receive \u2014 or expectation of receiving \u2014 a substantial benefit from the nonprofit in return for the payment. The IRS allows exempt organizations to use information that\u2019s an established part of a sponsor\u2019s identity, such as logos, slogans, locations, phone numbers and URLs.<\/p>\n There are exceptions. For example, if a payment amount is contingent upon the level of attendance at an event, broadcast ratings or other factors indicating the quantity of public exposure received, the IRS doesn\u2019t consider it a sponsorship. Therefore, the payment would likely trigger UBIT.<\/p>\n Providing facilities, services or other privileges to a sponsor (such as complimentary tickets to a concert or admission to a golf tournament) doesn\u2019t automatically disallow a payment from being considered qualified. If the privileges provided aren\u2019t what the IRS considers a \u201csubstantial benefit\u201d or if providing them is a related business activity, the payments won\u2019t be subject to UBIT. But when services or privileges provided by an exempt organization to a sponsor are deemed to be substantial, part or all of the sponsorship payment may be taxable.<\/p>\n UBIT usually does<\/em> apply to advertising<\/strong><\/p>\n Payment for advertising a sponsor\u2019s products or services is generally considered unrelated business income, so it\u2019s subject to UBIT. According to the IRS, advertising includes endorsements, inducements to buy, sell or use products, and messages containing qualitative or comparative language, price information, or other indications of value.<\/p>\n Some activities often are misclassified as advertising. Using logos or slogans that are an established part of a sponsor\u2019s identity is not, by itself, advertising. And if your nonprofit distributes or displays a sponsor\u2019s product at an event, whether for free or remuneration, it\u2019s considered use or acknowledgment, not advertising.<\/p>\n Contact us<\/strong><\/p>\n Recognizing the difference between taxable and nontaxable payments can be challenging. Be sure to contact us if you\u2019re soliciting support from possible sponsors and advertisers and aren\u2019t sure what crosses the tax line.<\/p>\n \u00a9 2023<\/em><\/p>\n <\/body> Sponsorship and advertising dollars can provide a real boost to your not-for-profit organization\u2019s income. However, if sponsors or advertisers receive a \u201csubstantial benefit\u201d or if providing benefits isn\u2019t a related business activity, you may owe unrelated business income tax (UBIT) on the payments. Here\u2019s a quick look at what is and isn\u2019t taxable. UBIT typically […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,10,15],"tags":[8,11,12],"class_list":["post-16789","post","type-post","status-publish","format-standard","hentry","category-articles","category-news","category-not-for-profit","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16789","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=16789"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16789\/revisions"}],"predecessor-version":[{"id":16790,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16789\/revisions\/16790"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=16789"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=16789"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=16789"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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