IRS Gives the Football Bowl Games Some Good News

The Internal Revenue Service gave college-football bowl games some good news last week, for a change.

The IRS proposed new regulations that would reverse its earlier view that bowl games and other non-profit groups must pay tax on the money they receive from corporate sponsors. The IRS will weigh public comment on the rules before issuing them in final form.

The IRS requires non-profit organizations to pay unrelated-business income tax, or UBIT, when they get revenue from an activity that is not substantially related to their stated non-profit mission, which for the bowl games is education.

The groups that stage two bowl games, the Mobil Cotton Bowl and the John Hancock Bowl, were directed last winter to pay UBIT on the revenue they received from the Mobil Corporation and the John Hancock Mutual Life Insurance Company, respectively.

Under the revised rules released last week, non-profit groups still would have to pay taxes on corporate-sponsorship revenue in some instances.

But the IRS significantly narrowed its definition of “advertising” that a bowl game might provide in exchange for the money that sponsors provide. In most cases, the new rules say, the use of a sponsor’s name in the title of the event, and even a contractual obligation that the sponsor’s logo must be prominently displayed, would not be considered as advertising, but merely as an acknowledgment which would not be subject to taxation.

Bowl officials said they were pleased by the new IRS approach.