Tax Exempt Organizations Urge Closure On Corporate Sponsorship Rules.

Eighteen members of the Tax Exempt Organizations Group, representing the interests of the arts, athletics, and the mass media, have urged Treasury to include completion of the corporate sponsorship regulations in the 1995 business plan.

With the exception of the proposed "tainting rule," the signatories say, "[T]he regulations are close to final form." But they take issue with the tainting rule, finding that "[I]t is unacceptable in that it threatens to subject to the unrelated business income tax (UBIT) all sponsorship revenue, even if only an incidental, inconsequential sponsorship activity is deemed to constitute advertising." Such a rule, they assert, even conflicts with the UBIT itself, as it applies in other contexts.

The signatories urge closure on this issue. "Without final guidance," they say, "the community will continue to labor with a cloud over its fundraising efforts, and its ability to plan for past and future income tax liabilities."

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January 19, 1995

The Honorable Leslie B. Samuels

Dear Assistant Secretary Samuels:

We are aware that your office is participating in the preparation of the Department of Treasury/Internal Revenue Service 1995 business plan. For the reasons explained below, we urge you to include completion of the corporate sponsorship regulations in the 1995 business plan.

The signatories below represent a diverse group of tax exempt organizations, from small, one-day-a-year community festivals to some of the largest tax exempt organizations in the country. In addition, the undersigned organizations are involved with the arts, medical research, sports, social welfare organizations and other exempt purpose functions. Each of us has encouraged Treasury and IRS to conclude work on the corporate sponsorship issue, and this past summer we met as a group with Treasury and IRS officials to present our collective views on the matter.

With the exception of the "tainting" rule in the proposed corporate sponsorship regulations, we believe that the regulations are close to final form. The tainting rule is unacceptable in that it threatens to subject to the unrelated business income tax ("UBIT") all sponsorship revenue, even if only an incidental, inconsequential sponsorship activity is deemed to constitute advertising. Such a rule is inconsistent with UBIT as it is applied in other contexts.

Members of the exempt organization community have been working with Treasury and IRS on corporate sponsorship for as long as ten years. Without final guidance on this issue, the community will continue to labor with a cloud over its fundraising efforts, and its ability to plan for past and future income tax liabilities. For these reasons, it is critically important to the exempt organization community for Treasury and IRS to come to closure on corporate sponsorship. Therefore, we urge you to include finalization of the corporate sponsorship regulations in the Treasury and IRS 1995 business plan.

Sincerely,

America's Public Television Independent Sector

cc: Commissioner Margaret Milner Richardson