Adam Barr reports in the latest GOLFWEEK that a bill related
to the budget crisis on Capitol Hill would "settle the question
of whether a corporate sponsors' payment is taxable." The Budget
Reconciliation Act of '95 includes "language that would nullify
the so-called 'tainting rule,'" which the IRS uses to "support
its position that all corporate sponsor payments are ineligible
for a charitable exemption if 'call to action' advertising is
used." That type of advertising encourages viewers to buy
products and services. If the bill is signed into law, only
income from call to action ads -- not income from "recognition"
advertising such as logo displays from sponsors -- will be
taxable. The IRS currently taxes both types of income. Barr
reports that different IRS offices "have decided the issue" in
different ways for golf tournament sponsors, who buy time on
network broadcasts (considered "call to action" advertising) and
also get recognition ads. Barr notes that a legislative solution
"would be faster" in settling the matter for sponsors, which is
currently experiencing "a lack of cogent" enforcement. The PGA
Tour has been lobbying to clear up the issue since '91
(GOLFWORLD, 11/25 issue).
