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Event Sponsor Agreement by mhr96780

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									          FAEGRE & BENSON   LLP




 THE SPORTS PHILANTHROPY PROJECT -
        DENVER, July 10, 2003
  TAX AND LEGAL ISSUES REGARDING
SPORTS PHILANTHROPY AND MARKETING


          J. Hazen Graves
       Minneapolis, Minnesota
         James D. Leonard
          Denver, Colorado
  FAEGRE & BENSON LLP

  J. Hazen Graves
  (612) 766-8805
  (800) 328-4393
hgraves@faegre.com


  James D. Leonard
   (303) 607-3644
   (800) 525-2086
jleonard@faegre.com

                        FAEGRE & BENSON   LLP
                Agenda

   Terminology
   Foundation - team relations
   Charitable contributions
   Regulation of fundraising
   Corporate sponsorships
   Sweepstakes



                            FAEGRE & BENSON   LLP
Terminology



        FAEGRE & BENSON   LLP
    Bill Wildt’s Motorsport
    Advancement Crusade

 Tax Court Memorandum 1989-93
 Docket No. 22975-87X
 Issued March 9, 1989
 Judge: Raum




                       FAEGRE & BENSON   LLP
FAEGRE & BENSON   LLP
            “501(c)(3)”

 Exempt from federal income taxes
 Charitable, religious, scientific, educational
  amateur sports, and prevention of cruelty to
  animals organizations




                            FAEGRE & BENSON   LLP
              “501(c)(3)”

   Classified as--
     “Private foundation” or
     Not a private foundation - “public
      charity”




                              FAEGRE & BENSON   LLP
   Taxable       Tax-Exempt
Organizations   Organizations

                      501 (c)(3)’s

                  Public     Private
                 Charities Foundations




                       FAEGRE & BENSON   LLP
          “Public Charity”

   Revenue from large number of sources




                           FAEGRE & BENSON   LLP
       “Private Foundation”

   Revenue from single source, e.g., the
    team




                             FAEGRE & BENSON   LLP
    Disadvantages of Private
       Foundation Status

   2% income tax
   Self-dealing
   5% annual payout
   No excess business holdings
   No lobbying




                            FAEGRE & BENSON   LLP
    Disadvantages of Private
       Foundation Status

 Limits on grants to individuals,
  organizations that are not public
  charities
 Less favorable tax deduction




                            FAEGRE & BENSON   LLP
Foundation-Team
    Relations

          FAEGRE & BENSON   LLP
Foundation-Team Relations

 All foundations: no “private benefit”
 Private foundations: no “self-dealing”




                           FAEGRE & BENSON   LLP
Foundation-Team Relations

   Private benefit
     Any use of foundation resources
      with net benefit to team




                            FAEGRE & BENSON   LLP
Foundation-Team Relations

   Examples
     Use of foundation funds to pay team
      employees
     Promoting ticket sales in foundation-
      funded ad
     Unnecessary foundation rental of
      team facility


                             FAEGRE & BENSON   LLP
Foundation-Team Relations

   Exceptions
     Increased good will, brand
      recognition, for team from
      foundation’s activities
     “Incidental” benefits




                            FAEGRE & BENSON   LLP
Foundation-Team Relations

   Self-dealing (private foundations only)
      Any private benefit to team
      Almost every transaction between
       foundation and team --even if
      advantageous to foundation




                             FAEGRE & BENSON   LLP
Foundation-Team Relations

   Examples
     Foundation purchase of merchandise
      from team
     Foundation lease of facility from
      team




                           FAEGRE & BENSON   LLP
Foundation-Team Relations

   Exceptions
     Increased good will, brand
      recognition for team
     Fair payments for personal services,
      .e.g., shared personnel




                            FAEGRE & BENSON   LLP
 Charitable
Contributions

         FAEGRE & BENSON   LLP
    Charitable Contributions

   Gift of $250 or more requires written
    (or email) receipt
      Amount
      Not the value of non-cash gifts
      Whether donor received any benefits
      If so, description and estimated value
       of benefits


                              FAEGRE & BENSON   LLP
    Charitable Contributions

   Example:
    Thank you for your gift of $500, which
     we received on December 15, 2003.
     For tax purposes, we are informing
     you that we provided no goods or
     services in exchange for your gift.




                            FAEGRE & BENSON   LLP
    Charitable Contributions

 Gift of $75 or more requires written (or
  email) receipt
    Amount
    Description and estimated value of
     benefits
    Statement re deductibility
 Financial penalty on organization for
  failure to provide receipt

                           FAEGRE & BENSON   LLP
     Charitable Contributions

   Example:
    Thank you for your gift of $100, which
     we received on December 15, 2003.
     In recognition of your gift we
     provided you with a sweater having
     an estimated market value of $32.
     The amount of your gift that is
     deductible for federal income tax
     purposes is limited to the excess of
     the gift amount over the value of the
     goods and services you Freceived in
                              AEGRE & BENSON
                                        LLP
     Charitable Contributions

   Disregarded goods and services
     Inexpensive items if total is ≤≤2% of
      gift and gift ≤≤$80*
     Token items
       • Name & logo
       • Payment ≥≥ $40*
       • Bookmarks, calendars, key chains,mugs,
         posters, t-shirts, etc.
       • Total cost/ donor/ year < $8*
                                FAEGRE & BENSON   LLP
    Charitable Contributions

   Disregarded goods and services
     Members-only newsletters (not
      commercial quality)
     Frequently exercisable membership
      benefits, if offered to < $75
      membership level
     Members-only events, if cost/ person
      ≤≤$8*, and benefit is offered to <$75
      membership level
                            FAEGRE & BENSON   LLP
    Charitable Contributions

   Charity auctions
     Donors of auction items may usually
      deduct value of contributed item
      (inventory exception)
     Buyers of auction items may deduct
      only the excess of price over value
     TIP: List item value in auction book
     Celebrity presence does not increase
      value
                            FAEGRE & BENSON   LLP
Fundraising
Regulation


         FAEGRE & BENSON   LLP
    Fundraising Regulation

 Varies by state
 Enforced by attorney general or
  department of commerce




                          FAEGRE & BENSON   LLP
      Fundraising Regulation

   Initial registration
      Puts organization on the radar
      Triggered by solicitation in state




                              FAEGRE & BENSON   LLP
      Fundraising Regulation

   Filing of contracts with state
     Professional fundraisers
     Commercial co-ventures




                              FAEGRE & BENSON   LLP
     Fundraising Regulation

   Annual reports
     Generally required for registered
      organizations
     Public information




                             FAEGRE & BENSON   LLP
     Fundraising Regulation

   Solicitations
      Some states require specific
       disclosures
      Penalties for fraud,
       misrepresentation
      Donor privacy - consent to sell
       names


                             FAEGRE & BENSON   LLP
 Corporate
Sponsorships

         FAEGRE & BENSON   LLP
         Golden Rules of Sports
          Marketing Contracts
1. Define/Understand Product or Service Categories.
2. Define/Understand Promotional Inventory.
3. Define/Understand Exclusivities.
4. Define/Understand Payments, Accelerations and
  Refunds.
5. Define/Understand Termination Rights, and Rights
  and Obligations on Termination.

     PLUS if you are the grantor, monitor your
     categories and exclusivities.
                                    FAEGRE & BENSON   LLP
      Sponsorship Agreements:
          Key Provisions
1. Generally
2. Sponsor Category
    a. What   is  sports        organization/sponsor
  strategy?
   b. Many categories are susceptible to
   multiple-carve-ups.
3. Exclusivity/Non-Exclusivity
   a. Are the rights granted to the sponsor in the
  product category exclusive or non-exclusive?
    b. Define exclusivity rights with respect to
  product categories and not specified
  competitors.                    FAEGRE & BENSON LLP
             Key provisions
                (con’t)
4. Territory
5. Rights Granted to Sponsor a/k/a “Promotional
   Inventory”
   a. Promotional Rights Examples.
       i.   Basic sales and marketing rights.
       ii. Media exposure rights.
       iii. Presence rights.
       iv. Clinics, programs and related rights.
       v. Distribution of information regarding
       sponsor and sponsor products to
   organization     mailing list.
                                 FAEGRE & BENSON   LLP
             Key Provisions
                (con’t)
    vi. Access to photographs, video and other
media.
    vii. Product use/efforts to encourage product
use by     team players.
    viii. Team and player appearances.
    ix. Internet rights.
    x. Provision of tickets, suites and hospitality.
    xi. Provision of team products and services for
use by
    sponsor in promotional efforts.
    xii. Ability to distribute premiums.
                                FAEGRE & BENSON   LLP
            Key Provisions
               (con’t)
b.  Basic Issues.
    i. Are certain rights exclusive or non-
exclusive?
    ii. Can the organization grant the rights it
    purports to give?
    iii. Are there any restrictions on the rights
           granted.
    iv. Who pays?
    v. Size and placement of presence items.
    vi. Timing. When is the right to be made
    available?
                                 FAEGRE & BENSON   LLP
           Key Provisions
              (con’t)

    vii. Potential Liabilities:
    Indemnification/Insurance/Releases.
    viii. The form, format and presentation
of all
     promotional        opportunities.
    ix. All promotional opportunities should
be exercised in accordance with all
applicable       laws, rules and regulations.
   x. Unrelated Business Taxable Income
   (“UBTI”) Considerations.

                              FAEGRE & BENSON   LLP
         Corporate
    Sponsorships -- UBTI

 Charitable gift?
 Advertising payment?




                         FAEGRE & BENSON   LLP
         Corporate
    Sponsorships -- UBTI

 Charitable gift is tax-exempt
 Advertising is usually taxable




                            FAEGRE & BENSON   LLP
           Corporate
      Sponsorships -- UBTI

   “Advertising”
      Promotional language
      Qualitative or comparative language
      Price information or indications of
       savings or value
      Endorsement
      Inducement to purchase


                             FAEGRE & BENSON   LLP
           Corporate
      Sponsorships -- UBTI
   “Acknowledgment”
      Use of sponsor’s name, logo, product
       lines in connection with sponsored
       activities
      Exclusive sponsorship arrangement
      Non-qualitative, non-comparative
       logos, slogans
      Sponsor’s address, phone, email
      Product displays
      Web site link           FAEGRE & BENSON
                                         LLP
           Corporate
      Sponsorships -- UBTI

   Other bases for avoiding tax:
     Revenue is not from a trade or
      business
     Revenue is not from an activity
      regularly carried on
     Revenue is offset by deductible
      costs


                            FAEGRE & BENSON   LLP
            Key Provisions
               (con’t)

c. Premiums.
      i. Approval.
      ii. Sponsor Conflict Issues.
      iii. Sourcing/Liability.
   d. Access To Membership Lists
      i. Confidentiality/non-use.
      ii. Third party mailing list service
   providers.


                                 FAEGRE & BENSON   LLP
             Key Provisions
                (con’t)
6. Player/Team Issues
7. Inability to Provide a Benefit/”Make Goods”
8. Payments
   a. Cash.
   b. VIK.
   c. Advertising and Promotional Benefits.
   d. Prizes or auction items.
9. Limitation on Rights
10. Approval Rights; Quality Control; Authorized Use;
     Injunctions
                                 FAEGRE & BENSON   LLP
                Key Provisions
                   (con’t)

11.   Term and Termination; Morals Clauses
12.   Rights of Negotiation; Right of First Refusal
13.   Indemnification and Insurance.
14.   Miscellaneous Provisions.
      a. Agency
      b. Governing Law
      c. Compliance with Law
      d. No Assignment



                                    FAEGRE & BENSON   LLP
        Event Sponsor agreement
                 Issues
1.    Generally
2.    Nature of Sponsorship; Sponsor Control
3.    Promotion of the Event
4.    Conduct of the Event
5.    Composite Marks
6.    Event Organizer Assistance; Sponsor Responsibilities
7.    Merchandising Rights
8.    Premiums
9.    Venue Restrictions
10.   Media Retention Rights
11.   Indemnity; Insurance and Releases
12.   Cancellation of the Event
                                        FAEGRE & BENSON   LLP
           Example:
    Conduct of Outdoor Event

“Organizer shall conduct the Event in a professional and
first class manner in accordance with the Event
schedule attached hereto.     The Event date(s) and
time(s) may be changed, rescheduled or otherwise
modified by Organizer, in its sole discretion for any
reason; provided, however, if any such change will
result in the Event concluding later than _____________
____, 20___, any such rescheduling shall be subject to
the mutual agreement of Organizer and Sponsor, which
agreement shall not be unreasonably withheld,
conditioned or delayed.”



                                     FAEGRE & BENSON   LLP
Sweepstakes



        FAEGRE & BENSON   LLP
              SWEEPSTAKES

1. Main Reasons.
  a.   Promotion.
  b.   Member Benefits.
2. Sweepstakes vs. Illegal Lottery.
  a.   Prize.
  b.   Chance.
  c.   Consideration.
3. Key Components.
  a. Rules.
  b. Entry Form.
  c. Prizewinner Affidavit, Release and Publicity
  Consent.                            FAEGRE & BENSON   LLP
               SWEEPSTAKES
                  (con’t)
4. Additional Considerations.
  a.   State Registration.
  b.   Online Sweepstakes.
  c.   Prize Indemnity Insurance.
  d.   IRS Reporting ($600 minimum).




                                       FAEGRE & BENSON   LLP
    TAX AND LEGAL ISSUES
     REGARDING SPORTS
PHILANTHROPY AND MARKETING




  J. Hazen Graves James D. Leonard




                          FAEGRE & BENSON   LLP

								
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