| ||The 2000 Proposed Regulations on Corporate Sponsorship Payments: A Step Toward Restoring the Public's Trust in Charitable Organizations |
Aaron P. Nocjar*
* Associate, Steptoe and Johnson LLP, Washington, DC; University of Notre Dame, B.A., 1995; Case Western Reserve University School of Law, J.D., 1998; Georgetown University Law Center, LL.M. in Taxation, 2001.
This article analyzes Treasury’s latest proposed regulations on corporate sponsorship payments, constructing at the outset a hypothetical corporate sponsorship arrangement that illustrates the issues analyzed. There follows a description of the motives that propel tax-exempt organizations and taxable corporate donors to enter such agreements. In general, while tax-exempt organizations mainly chase corporate sponsorship dollars to raise operating revenue, taxable corporate donors support tax-exempt organizations in an effort to appeal to the heart and, as a result, to the pocketbook of the public consumer. This article goes on to outline the legal framework from which the sponsorship controversy stems, focusing on the unrelated business income tax (“UBIT”) and the legal reasoning of Treasury and Congress regarding UBIT’s application to corporate support of tax-exempt organizations. An understanding of Treasury’s prior regulatory guidance helps to explain, but not justify, tax-exempt organizations’ attempts to escape Treasury’s newest set of rules. The legal issues created by the proposed regulations are also discussed, with specific focus on the major issues raised by tax-exempt organizations.
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