II

103D CONGRESS

1ST SESSION S. 1171

To amend the Internal Revenue Code of 1986 with respect to the taxation

of certain sponsorship payments to tax-exempt organizations and certain

amounts received by Olympic organizations.

IN THE SENATE OF THE UNITED STATES

JUNE 29 (legislative day, JUNE 22), 1993

Mr. BREAUX (for himself, Mr. PRYOR, Mr. BOREN, and Mr. CHAFEE) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 with respect

to the taxation of certain sponsorship payments to taxexempt organizations and certain amounts received by

Olympic organizations.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. EXCLUSION FROM UNRELATED BUSINESS TAX4 ABLE INCOME FOR CERTAIN SPONSORSHIP

5 PAYMENTS.

6 (a) IN GENERAL.—Section 513 of the Internal Reve7 nue Code of 1986 (relating to unrelated business taxable
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1 income) is amended by adding at the end thereof the fol2 lowing new subsection:

3 ‘‘(i) TREATMENT OF CERTAIN SPONSORSHIP PAY4 MENTS.—

5 ‘‘(1) IN GENERAL.—The term ‘unrelated trade

6 or business’ does not include the activity of soliciting

7 and receiving qualified sponsorship payments with

8 respect to any qualified public event.

9 ‘‘(2) QUALIFIED SPONSORSHIP PAYMENTS.—

10 For purposes of this subsection, the term ‘qualified

11 sponsorship payment’ means any payment by any

12 person engaged in a trade or business with respect

13 to which there is no arrangement or expectation that

14 such person will receive any substantial return bene15 fit other than—

16 ‘‘(A) the use of the name or logo of such

17 person’s trade or business in connection with

18 any qualified public event under arrangements

19 (including advertising) in connection with such

20 event which acknowledge such person’s sponsor21 ship or promote such person’s products or serv22 ices, or

23 ‘‘(B) the furnishing of facilities, services,

24 or other privileges in connection with such event

25 to individuals designated by such person.
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1 ‘‘(3) QUALIFIED PUBLIC EVENT.—

2 ‘‘(A) IN GENERAL.—For purposes of this

3 subsection, the term ‘qualified public event’

4 means any event conducted by an organization

5 described in paragraph (3), (4), (5), or (6) of

6 section 501(c) or by an organization described

7 in section 511(a)(2)(B) if such event is—

8 ‘‘(i) a public event the conduct of

9 which is substantially related (aside from

10 the need of the organization for income or

11 funds or the use it makes of the profits de12 rived) to the exempt purposes of the orga13 nization conducting such event, or

14 ‘‘(ii) any public event not described in

15 clause (i) but only if such event is the only

16 event of that type conducted by such orga17 nization during a calendar year and such

18 event does not exceed 30 consecutive days.

19 An event shall be treated as a qualified public

20 event with respect to all organizations referred

21 to in the preceding sentence which receive spon22 sorship payments with respect to such event if

23 such event is a qualified public event with re24 spect to 1 of such organizations; except that a

25 payment shall be treated as not being from an
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1 unrelated trade or business by reason of this

2 sentence only to the extent that such payment

3 is used to meet the expenses of such event or

4 for the benefit of the organization with respect

5 to which such event is a qualified public event

6 (determined without regard to this sentence).

7 ‘‘(B) EXEMPT PURPOSE.—For purposes of

8 subparagraph (A), the term ‘exempt purpose’

9 means any purpose or function constituting the

10 basis for the organization’s exemption under

11 section 501 (or, in the case of an organization

12 described in section 511(a)(2)(B), the exercise

13 or performance of any purpose or function de14 scribed in section 501(c)(3)).

15 ‘‘(4) REGULATIONS.—The Secretary shall pre16 scribe such regulations as may be necessary to pre17 vent the avoidance of the purposes of this subsection

18 through the use of entities under common control.’’

19 (b) EFFECTIVE DATE.—The amendment made by

20 subsection (a) shall apply to events conducted after De21 cember 31, 1992.

22 SEC. 2. TREATMENT OF CERTAIN AMOUNTS RECEIVED BY

23 OLYMPIC ORGANIZATIONS.

24 In the case of a qualified amateur sports organization

25 described in section 501(j)(2) of the Internal Revenue
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1 Code of 1986, or an organization which would be so de2 scribed but for the cultural events it organizes in connec3 tion with national or international amateur sports com4 petitions—

5 (1) for purposes of section 512(b) of such Code,

6 the term ‘‘royalty’’ includes any income received (di7 rectly or indirectly) by such organization if a sub8 stantial part of the consideration for such income is

9 the right to use trademarks, designations, or similar

10 properties indicating a connection with the Olympic

11 Games to be conducted in 1996 or related events or

12 the participation of the United States Olympic Team

13 at such Games or events, and

14 (2) nothing in section 514 or 512(b) of such

15 Code shall be construed as treating any amount

16 treated as royalty under paragraph (1) as an item

17 of income from an unrelated trade or business.

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