Hosting a special sports tournament can raise interest and funds – but what might be the unrelated business income ramifications?



Troas Bible College (TBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

TBC’s Management Team is in the final throes of planning their first annual Thanksgiving Women’s Basketball Tournament.  TBC will host three teams from outside their conference over the Thanksgiving weekend.  Revenues will come from admission sales, corporate sponsorships, and the sale of broadcast rights to a regional television network.

TBC’s Accounting Team calls us to ask about unrelated business income that might be generated by the tournament.  “We have an attorney on our board who insists that we will have to file a Form 990-T and pay taxes on the revenues because the tournament is an ‘unrelated business activity’ due to the fact that sports are not related to our educational exempt purpose,” they say.

“Well,” we reply, “that’s not a fact.  You could have an issue if the ‘corporate sponsorships’ are not qualified sponsorship payments, but sports – in and of themselves – have been found by the IRS to be related to a college’s educational exempt purpose.  In fact, the IRS says, ‘an athletic program is considered an integral part of the educational process of a university.’”

“So we’re okay, then?” they ask.

“Let’s look closer at those corporate sponsorships and it wouldn’t hurt to review the contract with the TV network, but you should be okay.”



From IRS Publication 598 (page 4):

Broadcasting rights. An exempt collegiate athletic conference conducts an annual competitive athletic game between its conference champion and another collegiate team. Income is derived from admission charges and the sale of exclusive broadcasting rights to a national radio and television network. An athletic program is considered an integral part of the educational process of a university.

The educational purposes served by inter- collegiate athletics are identical whether conducted directly by individual universities or by their regional athletic conference. Also, the educational purposes served by exhibiting a game before an audience that is physically present and exhibiting the game on television or radio before a much larger audience are substantially similar. Therefore, the sale of the broadcasting rights contributes importantly to the accomplishment of the organization’s exempt purpose and isn’t an unrelated trade or business.



  • Sports teams, events, and tournaments can raise interest and dollars for your school: ticket sales, corporate sponsorships, the sale of broadcast rights, etc.
  • Intercollegiate athletics are generally considered by the IRS to be related to the educational purpose of a college.
  • In IRS Publication 598, “Tax on Unrelated Business Income of Exempt Organizations,” there is an example which shows that income from sale of “Broadcasting rights” for an athletic event isn’t an unrelated trade or business.
  • Having said all of that, an institution should carefully review all of the revenue sources from athletics to ensure that they are not liable for unrelated business income taxes.

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

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