IRS issues final regulations on corporate sponsorships. (Headlines).

More than two years after the agency issued proposed regulations, the Internal Revenue Service issued final regulations regarding the tax treatment of sponsorship payments made to exempt organizations. The final regulations also refer to the question of how to treat Internet links from the organization's Web site to the sponsor's page. Exempt organizations will now face a tax on corporate sponsorship payments if their agreement with a sponsor provides that they will not offer or sell products that compete with those of the sponsor. Otherwise, tax-free sponsorship payments are allowed under these rules if they do not involve such agreements.

In addition, the IRS did away with the $79 ceiling for insubstantial benefits, so any return benefit that is valued at not more than 2 percent of the total sponsorship payment shall be insubstantial and thus disregarded even if the value of the return benefit is greater than $79.

ASAE argued that the IRS should not treat the provision of an Internet link from an exempt organization to a corporate sponsor's Web site as a taxable event. The regulations provide that such a link is considered a tax-free acknowledgment. However, a link to a page on the sponsor's Web site that includes an endorsement by the exempt organization of the sponsor's product would be considered taxable advertising.

The final regulations became effective April 25 and apply to any payments solicited or received after December 31, 1997. For a copy of the regulations, e-mail Andrea Cianfrani at acianfrani @asaenet.org.