Meant to use Exclusive Provider versus Sponsor for the title.
We have an organization looking to sponsor an event. The director of the department holding the event offered the company a chance to be the exclusive sponsor for their industry at the event for an additional amount over the normal sponsorship level.
They will not be providing services or selling anything at the event. Every other benefit would not be substantial.
Looking at the IRS page they state -
- Exclusive provider arrangements that limit the sale, distribution, availability, or use of competing products, services or facilities in connection with an exempt organization’s activity generally results in a substantial return benefit. See Treas. Reg. 1.513-4(c)(2)(vi)(B) for definition. However, an arrangement that acknowledges the payor as the exclusive sponsor of an exempt activity, or the exclusive sponsor representing a particular trade, business or industry, generally, does not result in a substantial return benefit. (The difference here is exclusive sponsor versus an exclusive provider.)
Advertising or qualified sponsorship payments?
26 CFR § 1.513-4 - Certain sponsorship not unrelated trade or business.
Excluding the obvious problem of limiting potential sponsors, my question is what part of the arrangement, if any, constitutes as gift?
Does them paying extra to be the exclusive sponsor for their industry change anything?
------------------------------
Kevin Kropp
Texas A&M University-Corpus Christi
------------------------------