Advertising revenue is considered “unrelated business income” (UBI) by the Internal Revenue Code (IRC) Section 513. But how do you know the revenue your organization is receiving is REALLY considered advertising? This is where a closer look can save you big tax dollars!
To make it simple, you have advertising revenue subject to the UBI rules if the “advertising” promotes or markets any trade or business, or the advertiser otherwise expects more than a negligible commercial benefit in return. If merely the name, logo, or product line of the advertiser is listed on a banner or appears in a publication, such as a conference agenda, it is more aptly described as “sponsorship revenue” and is not subject to the UBI taxation.
Real life situations can appear to be somewhere in between the definition of advertising and sponsorship, and (of course) the guidance as written in the IRC is copious and confusing, so consult your tax practitioner if you are not sure whether you have advertising (taxable) or sponsorship revenue (not taxable).