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Under the Internal Revenue Code, \u201cqualified sponsorship payments\u201d to not-for-profits aren\u2019t subject to unrelated business income tax (UBIT). Qualified payments refer to money, property transfers or the performance of services by a business without an expectation or arrangement that the business will receive any \u201csubstantial return benefit\u201d in exchange. However, some corporate sponsorships don\u2019t qualify, and your organization could end up with UBIT liability.<\/p>\n
How do sponsors benefit?<\/strong><\/p>\n Qualified sponsorship payments may fund a single event, a series of related events, an ongoing activity or continuing support of your nonprofit\u2019s operation. Qualified sponsorship payments don\u2019t have to relate to your exempt purpose.<\/p>\n But return benefits to the sponsor other than acknowledgments can result in UBIT. Such benefits include:<\/p>\n A note about exclusive sponsorships: You can agree that a sponsor will be exclusive, but you can\u2019t, for example, exclude or limit a competitor\u2019s products at a sponsored event.<\/p>\n What\u2019s excluded?<\/strong><\/p>\n If a sponsor receives a substantial return benefit, only the amount that exceeds the benefit\u2019s fair market value (FMV) is a qualified sponsorship payment. And if you can\u2019t establish that the payment exceeds the FMV, no portion of the payment constitutes a qualified sponsorship payment.<\/p>\n Payments contingent on the degree of public exposure, such as the level of attendance at your event, broadcast ratings or similar factors, aren\u2019t qualified sponsorship payments. Neither are payments related to convention or trade show activities. Also excluded are payments that entitle the sponsor to use its name or logo in your regularly scheduled periodicals, such as magazines or e-newsletters. If part of a payment is qualified and part isn\u2019t, the IRS will treat the portions as separate payments.<\/p>\n How can you acknowledge support?<\/strong><\/p>\n The primary dilemma presented by corporate sponsorships is the issue of advertising. In general, advertising is intended to promote a sponsor\u2019s products, services or facilities \u2014 and it can get you in hot\u00a0water.<\/p>\n To avoid UBIT issues, provide only acknowledgments. These can include the sponsor\u2019s logo, slogans, brand or trade names; locations and phone numbers; product service listings; and value-neutral descriptions of its product line or services. An acknowledgment can also link to a sponsor\u2019s website, provided it directs to the website\u2019s home page, not to the page of a particular product or service. Try to avoid comparative or qualitative descriptions \u2014 for example, \u201cthe best software for nonprofits.\u201d<\/p>\n Acknowledgments shouldn\u2019t include price information, indications of savings or value, or an endorsement or inducement to buy, sell or use the sponsor\u2019s products or services. But mere display or distribution of a sponsor\u2019s product at a sponsored activity typically isn\u2019t considered an inducement.<\/p>\n Qualified vs. nonqualified<\/strong><\/p>\n At a time when every dollar counts, your nonprofit doesn\u2019t want to learn it\u2019s on the hook for UBIT. We can help. Contact us to learn more about the difference between qualified vs. nonqualified sponsorship payments.<\/p>\n \u00a9 2025<\/em><\/p>\n <\/body> Under the Internal Revenue Code, \u201cqualified sponsorship payments\u201d to not-for-profits aren\u2019t subject to unrelated business income tax (UBIT). Qualified payments refer to money, property transfers or the performance of services by a business without an expectation or arrangement that the business will receive any \u201csubstantial return benefit\u201d in exchange. However, some corporate sponsorships don\u2019t qualify, […]<\/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-17309","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\/17309","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=17309"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/17309\/revisions"}],"predecessor-version":[{"id":17310,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/17309\/revisions\/17310"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=17309"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=17309"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=17309"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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