January 17, 1992
Exempt Organization Donor Recognition
is Not Advertising
WASHINGTON - Tax exempt
organizations can publicly acknowledge donors for their contributions, but if the
organizations conduct advertising for donors the payments are taxable income, not tax
The Internal Revenue Service today said that recent publicity about corporate
sponsorship income of college football bowl games has prompted concerns from many exempt
organizations that recognition of contributors will make donations taxable. IRS said it
has not changed its position on the issue of recognizing donors.
Under current tax law, donations a charitable organization receives are considered tax
exempt contribution income if the organization does not, in return, provide a valuable
benefit or service to the donor. Mere recognition of a contributor as a benefactor
normally is of little or no value to the donor and is incidental to the contribution.
IRS said exempt organizations that go beyond recognition and extensively promote the
donor are engaging in advertising, which is unrelated to the mission of tax exempt
organizations. In these cases, exempt organizations must pay unrelated business income tax
(UBIT) on the payments received in exchange for advertising services provided.
IRS offered the following as examples of incidental recognition that are not
- A university names a professorship, scholarship or building after a benefactor.
- A public radio or television station acknowledges a program underwriting on the air or
in its broadcast schedule.
- A performing arts group acknowledges a contributor in the program for a performance.
Associating the name of the sponsor with the name of the exempt organization's event is
not, by itself, advertising that would trigger UBIT, said IRS. Rather, all facts and
circumstances of the relationship between the sponsor and exempt organization must be
considered. Items to consider include the value of the service provided in exchange for
the payment and the terms under which payments and services are rendered.
Indicators that an exempt organization is engaged in the unrelated business activity of
- providing exposure of the sponsor's name, logo or corporate message according to
negotiated terms of a contract or other agreement,
- agreeing to verbally or visually maximize donor name or logo exposure in the media and
during the sponsored activity,
- linking the amount of payment to the amount of exposure that the donor's name or logo
- agreeing that payment is contingent upon the organization securing television or other
marketing contracts to provide the sponsor's name widespread exposure.
IRS said that this guidance will be contained in examination guidelines being developed
for use by IRS agents in the exempt organization examination program. The guidelines will
focus on corporate sponsorship income received by exempt organizations conducting public
The guidelines will be proposed in Announcement 92-15, to appear in Internal Revenue
Bulletin 92-5, dated Feb. 3, 1992. The IRS invites public comment on these proposed
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