Besides, if anyone is concerned about this, it would be easy enough to follow the instructions in the article to set guidelines for what the ads/sponsorships could contain so that they DO meet the criteria for sponsorship.

Actually, I think you were probably right on.

I suspect this is one of the areas open to interpretation. As for me - I'm going with what the IRS guy told me, so we probably aren't reporting the "advertising" as UBI.

I got the impression - not that he said this straight out - that his general advice was to keep everything as simple as possible. Don't interpret things too narrowly. Don't file extra forms. Don't call attention to yourself. Frankly, they don't WANT to spend more time processing the typical PTO's returns. It's not their goal for us to file the most complex paperwork possible.

Our directory sponsorship/adversting - whatever you term it - probably ranges from $700-$1500, so it doesn't even exceed the $1000 cap each year. It's not like we're making $20,000 in a side business. I have no ethical concerns about it - even if I'm not sure of the exact justification.

[ 01-27-2005, 04:18 PM: Message edited by: JHB ]

JHB--Darn, thought I had found the explanation...! Grasping at straws here, but if you think what you have falls under the category of "ads" now the only other reasoning I can come up with is that the ads are sold by volunteers. Usually any income derived from work done by volunteers is exempt from UBIT.

Great article. Based on that information, then I'd have to say what have in our directory are indeed "ads". We sell space in the publication and the advertiser provides camera ready copy. It's the same type of ad that you would see in a newspaper - phone number to call, phrases touting why they are the best choice, etc.

If you're interested, and you can make it through the article, this gives some of the reasoning behind why directory "advertising" would be considered more of a sponsorship (acknowledgement) than true advertising subject to UBIT.
www.iknow.org/pages/articles/corpspon.html

If your org. is a 501c3, then all you SHOULD have is "sponsorships"- not "ads" - in your directory. If the publication is a production of your org. then any income from directory "ads" is not taxable and not ubi.