April 04, 2007

Income From Trade Show Activities Not Unrelated Business Income

The IRS has ruled that income a tax-exempt trade group received from its activities with a for-profit trade show operator is not unrelated business income because the activities are substantially related to the trade group's exempt purpose.

"X is exempt from federal income tax as an organization described in section 501(c)(6) of the Code. X represents the a industry to government, media, business and consumers.

Y is a for-profit entity that owns and operates several trade shows for the a industry. The trade shows are held annually around the world, and promote and stimulate interest in the a Industry. The industry is promoted through exhibits and educational programming. The trade shows provide a gathering place for industry professionals to exchange ideas, know-how and exhibit their wares. The educational programming provides ideas for solutions to industry problems; offers trends and innovations; and, promotes awareness of the industry legislative objectives and legal compliance imperatives. The trade shows draw a wide variety of members of the industry, and also attract many consumers of industry products. They attract approximately u attendees and approximately v exhibitors and related staff.

X and Y entered into a b Agreement and subsequently executed a c Agreement that provide the terms and conditions by which X will sponsor two of the annual trade shows conducted by Y."

Under these conditions, the IRS determined that "Conference Net Profit Revenue and Sponsorship Revenue received by X is substantially related to the activities of the organization, and the income therefore is not unrelated business income."

Ltr. Rul. 200713024