12. Corporate Sponsorship

A corporate sponsorship payment is a payment made by a corporation or business to the University in return for which the company receives some mention or acknowledgement of its products or services. An unrelated trade or business does not include the activity of soliciting and receiving qualified sponsorship payments.

1. Qualified sponsorship payment

Qualified sponsorship payment means any payment made by any person engaged in a trade or business with respect to which there is no arrangement or expectation that such person will receive any substantial return benefit other than the use or acknowledgement of the name or logo (or product lines) of such person’s trade or business in connection with the activities of the organization that receives such payment.

Limitation of Qualified Sponsorship

  • A payment is not qualified sponsorship payment if it entitles the payer to the use or acknowledgement of the business name, logo, or product lines in the University’s periodical.  For this purpose, the periodical is any regularly scheduled and printed materials (for example, a monthly journal) published by or on behalf of the University. It does not include material that is related to a specific event conducted by the University (such as a program or brochure distributed at a sponsored event).
  • A payment is not a qualified sponsorship if its amount is contingent upon the level of attendance, broadcast ratings, or other factors indicating the degree of public exposure.

2. Substantial Return Benefit

Providing “substantial return benefit” in connection with a sponsorship payment does not affect whether the payment is qualified sponsorship payment. Instead, providing these goods or services is treated as a separate transaction.

Substantial return benefit is defined as any benefits other than (1) the use or acknowledgment by the University of the payor’s name or logo, or (2) goods and services with aggregate fair market value (FMV) of less than 2% of the total payments. If the aggregate of the benefits exceeds 2% of the payment, the entire FMV of the benefits are a substantial return of benefit.

If the University establishes that the payment exceeds the FMV of any substantial return benefit, then the portion that exceeds the FMV of the substantial return benefit is qualified sponsorship.  However, if the University does not establish that the payment exceeds the FMV of the substantial return benefit, then no portion of the payment constitutes a qualified sponsorship payment.

Benefits provided to the payor may include:

  • advertising (see (4) below)
  • goods, facilities, services or other privileges
  • exclusive provider arrangements (may be excluded from UBI - see (5) below)
  • exclusive or nonexclusive rights to use an intangible asset, such as trademark, patent, logo, or designation of the University (may be excluded under royalty exclusion)

3. Use or Acknowledgement

A substantial return of benefits does not include the use or acknowledgement of the name or logo (or product line) of the payor’s trade or business. Use or acknowledgement may include:

  • exclusive sponsorship arrangements (e.g., announce the event is sponsored exclusively by the payor)
  • logos and slogans that do not contain qualitative or comparative descriptions of the payor's products, services, facilities or company
  • a list of the payor's locations, telephone numbers, Internet address
  • value-neutral descriptions, including displays or visual depictions, of the payor's product-line or services
  • the payor's brand or trade names and product or service listings.

Logos or slogans that are an established part of a payor's identity are not considered to contain qualitative or comparative descriptions. Mere display or distribution, whether for free or remuneration, of a payor's product by the payor or the University to the general public at the sponsored activity is not considered an inducement to purchase, sell or use the payor's product and, thus, will not affect the determination of whether a payment is a qualified sponsorship payment.

Sometimes the University receives payment from a sponsor in exchange for the sponsor’s hypertext links or banners on the University’s website. If the banners or links only identify the sponsor, the IRS will characterize them as acknowledgement of a sponsor. The IRS also believes that a static banner will retain its nature as acknowledgement while a dynamic banner may be considered as an advertisement.

4. Advertising

Advertising means any message or other programming material which is broadcast or otherwise transmitted, published, displayed or distributed, and which promotes or markets any trade or business, or any service, facility or product.  Advertising the payor’s products or services is subject to the substantial return benefits test.

Advertising includes

  • messages containing qualitative or comparative language (unless such language is an established part of the sponsor’s identity)
  • price information or other indications of savings or value
  • an endorsement
  • an inducement to purchase, sell, or use any company, service, facility or product.

A single message that contains both advertising and an acknowledgment is advertising.

The provisions do not apply to activities conducted by a payor on its own. For example, if a payor purchases broadcast time from a television station to advertise its product during commercial breaks in a sponsored program, the University’s activities are not thereby converted to advertising.

5. Exclusive Provider Arrangement

An exclusive provider arrangement is an arrangement that limits the sales, distribution, availability, or use of competing products, services, or facilities in connection with the University’ ‘s activity. An exclusive provider arrangement generally results in a substantial return benefit; however, the income from some exclusive provider arrangement may be excluded from UBI under other theories.

If the contract grants the company a license to market its products using the university’s name and logo, the portion of the total payment attributable to the license maybe excludable from UBI as a royalty. In some cases, payments in connect with the grant of an exclusive concession, such as for the operation of a campus bookstore or cafeteria, may be treated as rental income from real property, therefore, are not included in UBI.

However, when the University agrees to perform substantial services in connection with the exclusive provider arrangement, income received by the University may be includable in the UBI.


The University enters into a multi-year contract with a sports drink company under which the company will be the exclusive provider of sport drinks for the University’s athletic department and concessions.

If the company agrees to provide, stock, and maintain on-campus vending machines as needed, leaving little or no obligation on the University’s part to perform any services or conduct activities in connection with the enterprise, then the income from the exclusive provider arrangement is excludable from UBI.

If as part of the contract, the University agrees to perform various services for the company, such as guaranteeing that coaches make promotional appearance on behalf of the company (e.g., attending photo shoots, filmed commercials, and retail store appearances), assisting the company in developing marketing plans, and participating in joint promotional opportunities.  In this case, the income from this exclusive provider arrangement is not excludable from UBI.

(IRS Memorandum August 14, 2001)