IRS PLAN TAXING FOR BOWLS

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, January 20, 1993                   TAG: 9301200008
SECTION: SPORTS                    PAGE: B-8   EDITION: NEW RIVER VALLEY  
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium
IRS PLAN TAXING FOR BOWLS
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., respectively.
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.
Officials of several bowls have been fighting the IRS on the issue. They contend that if bowls have to pay tax on sponsors' payments, the ultimate losers will be colleges and their athletic conferences. A bowl generally must turn over at least 75 percent of its proceeds to the colleges.
Under the clarifications issued Tuesday:

Sponsors' payments will not be considered advertising income simply because the company has a contract with the exempt organization, or because of the frequency or prominence of the display of the corporate logo.

Size or type of exempt organization is not relevant. The rules apply equally to local and national events.

All types of sponsorship activities involving broadcast, print and other forms of corporate acknowledgement or advertising are affected.
The regulation will be the subject of a public hearing on July 8. It could become final any time after the hearing.

by Bhavesh Jinadra by CNB