Nonprofit Tax UBIT Update: Educational Periodicals
Section 1.512(a)-1(f) of the Income Tax Regulations provides that amounts realized from the sale of advertising in a periodical constitute gross income from an unrelated trade or business activity involving the exploitation of an exempt activity, namely the circulation and readership of the periodical developed through the production and distribution of the readership content of the periodical. Subject to the limitations of paragraph (d)(2) of the regulation, where the circulation and readership of an exempt organization periodical are utilized in connection with the sale of advertising in the periodical, expenses, depreciation, and similar items of deductions attributable to the production and distribution of the editorial or readership content of the periodical qualify as items of deductions directly connected with the unrelated advertising activity.
Section 1.513-4 of the Income Tax Regulations provides rules for qualified sponsorship payments, and excepts from such rules the income from the sale of advertising or acknowledgements in exempt organization periodicals. A “periodical” is defined as regularly scheduled and “printed material” published by or on behalf of an exempt organization that is not related to and primarily distributed in connection with a specific event conducted by the organization. For this purpose, printed material includes material that is published electronically.
Also, check out the 2014 Advisory Committee on Tax Exempt/Governmental Entities (ACT) Report – released on June 11 – at http://www.irs.gov/pub/irs-tege/tege_act_rpt13.pdf