IRS Moves to Tax College Football Bowls on Payments
- Share via
WASHINGTON — The Internal Revenue Service on Tuesday restated its intention to tax college football bowls and other tax-exempt organizations on corporate sponsorship payments received in exchange for advertising.
No tax will be imposed, the IRS said, if an otherwise tax-exempt organization merely acknowledges a sponsor’s payment.
“But where the exempt organization offers a business service in exchange, such as advertising, the payments are taxable unrelated business income,” the IRS said in a proposed regulation.
The rule is the third attempt in 14 months to clarify tax treatment of sponsorship payments. It grew out of a ruling that held the Mobil Cotton Bowl and the John Hancock Bowl liable for taxes on contributions by their corporate sponsors--an estimated $2 million a year from Mobil Oil Corp. and $1 million a year by John Hancock Mutual Life Insurance Co.
The IRS reasoned that the companies were not making disinterested gifts to the bowls but, rather, were simply paying for advertising--a business venture not related to the bowls’ tax-exempt purpose.
The new regulation attempts to define activities that are considered advertising and, thus, would give rise to a tax.
“Examples . . . are where a contract stipulates that the size of the sponsorship payment is dependent upon the size of the event’s audience, or where references to the corporation’s sponsorship include a promotion to buy the corporation’s product,” the IRS said.
More to Read
Go beyond the scoreboard
Get the latest on L.A.'s teams in the daily Sports Report newsletter.
You may occasionally receive promotional content from the Los Angeles Times.