There are many reasons small businesses should sponsor speakers. The best reason is the fact that you’ll be reaching your target audience. In other words, you only get your message in front of the people who really want to hear it. As a speaker this is a good selling point when pitching your sponsorships to small businesses.

But another great reason to sponsor speakers is that sponsorship is a tax write-off. Here is what the IRS says about sponsorship tax deductions:

IRS Publication 535:

“You generally can deduct reasonable advertising expenses that are directly related to your business activities.

You can usually deduct as a business expense the cost of institutional or goodwill advertising to keep your name before the public if it relates to business you reasonably expect to gain in the future.”

The line between advertising, marketing, and charitable donations is a blurry one. So I asked the experts to help define how businesses can use sponsorship as a tax write off:

“Sponsorship can most certainly be a tax write-off for small businesses as long as there is a clear connection between the sponsorship and your business.

For example if you are sponsoring a pee-wee baseball team and naming the team after your business or there is a listing of the business name in the program, then there is a clear connection between the sponsorship and the business. It is visible that the sponsorship is a promotional effort for the business. Thus, it would be written-off as an advertising expense.

However, if the sponsorship has no connectiusiness and the sponsee is a non-profit then that is classified as a charitable contribution and cannot be written off as a marketing expense because the sponsorship is not giving your business any public exposure.”
Anil Melwani, CPA

212 Tax & Accounting Services
370 Lexington Avenue, Suite 414
New York, NY 10017

P. 212-475-1040
F. 917-534-6310
www.212tax.com

 

“Sponsorship can be considered a business expense if the purpose is
advertising.
Advertising includes:
1) Messages containing qualitative or comparative language, price
information, or other indications of savings or value,
2) Endorsements, and
3) Inducements to purchase, sell, or use the products or services.

The use of promotional logos or slogans that are an established part of the
sponsor’s identity is not, by itself, advertising. In addition, mere
distribution or display of a sponsor’s product by the organization to the
public at a sponsored event, whether for free or for remuneration, is
considered use or acknowledgment of the product rather than advertising.

Sponsorship may qualify as a charitable deduction if there is no deemed
derived benefit from the sponsorship.”

Vincenzo Villamena,  managing partner of the CPA firm, Online
Taxman. We are a boutique CPA firm specializing in
tax preparation for entreprenuers, US expats and other folks in special
situations.

Online Taxman | 347 Fifth Ave. Suite 1402-171 | New York, NY | 10016 |

vincenzo@onlinetaxman.com | (p) 646.400.0046 | (f) 815.550.8651 |

 

“I’m a Boston-based tax lawyer (not an accountant) and I know a lot of tidbits about sponsorship expenses. For example, last year, the US Tax Court upheld the deductible expenses of a husband-and-wife small business that sponsored their own son’s motorcross racing activity. See Evans, TC Memo 2014-237.

Further, even when the sponsorship recipient is a tax-exempt organization, sponsors generally prefer to characterize their payments as marketing expenses rather than charitable contributions because of the multiple limitations and strings attached to the latter. This approach was upheld by the IRS itself in a case involving sponsorship of a charitable horse race. Of course, the tax exempt organizations themselves take the opposite view, always attempting to characterize revenue as “qualified sponsorship” income that is exempt of unrelated business income tax, rather than advertising income which is subject to tax.”
Travis L.L. Blais
BLAIS & HALPERT LLC
One International Place, 8th Floor
Boston, Massachusetts 02110

O: (617) 918-7081
M: (617) 460-4235
E: TBlais@BlaisTaxLaw.com<mailto:tblais@blaistaxlaw.com>
W: www.BlaisTaxLaw.com<http://www.blaistaxlaw.com/>

 


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