Halos, Billboards, and the Taxation of Charitable Sponsorships

Abstract:     
This article reexamines the controversy in the 1990s over the tax treatment of revenues charities earn by selling sponsor acknowledgments. The controversy erupted when the IRS tried to tax Mobil Cotton Bowl and John Hancock Bowl on their sponsorship revenues, claiming that it represented payment for advertising. It ended when Congress amended to tax code to grant sponsorship revenues an effective exemption from tax. Traditionally, this has been understood as a simple and sordid story of raw lobbying power supplanting good tax policy. I argue that the controversy reflects the overriding importance of political symbolism in understanding the charitable tax exemption and the unrelated business income tax (UBIT) that protects it.

Number of Pages in PDF File: 49

Keywords: exempt organization, nonprofit organization, charity, unrelated business income tax, UBIT, sponsorships, advertising, taxation, tax, tax exemption, legislation, safe harbors

JEL Classification: K34

Accepted Paper Series