Exempt/Non-Exempt Joint Ventures: Furthering Exempt Purpose Through Partnerships With For-Profit Companies

Protecting Exempt Status, Avoiding UBTI, Structuring Considerations and JV Alternatives

Recording of a 110-minute CPE webinar with Q&A


Conducted on Thursday, August 16, 2018

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will give nonprofit advisers and tax professionals a practical guide to the rules governing joint ventures between tax-exempt organizations and for-profit entities. The panel will discuss the control regulations for determining the tax treatment of joint venture proceeds, detail the UBTI rules as they specifically apply to joint ventures, and offer useful tools for helping exempt organizations in joint ventures avoid IRS sanctions for prohibited activities.

Description

Joint ventures between tax-exempt organizations and for-profit entities have long been a feature of many health organizations and are continuing to increase in popularity among broader segments of the nonprofit sector. The Internal Revenue Code permits these joint ventures under certain conditions, and failure to abide by the joint venture rules could lead to the exempt org being subject to tax on UBTI or even the loss of exempt status.

Tax-exempt entities engaged in joint activities with for-profit companies generally must be able to meet two criteria for any income from the joint venture to be treated as exempt. First, the joint venture must serve primarily to further the charitable purpose of the exempt organization. The second requirement is that the operating agreement must explicitly provide that the primary goal of the joint venture is the advancement of the tax-exempt mission and only incidentally for the benefit of the for-profit partner or subsidiary.

The critical factor in determining whether an exempt org joint venture meets the standards of Rev. Rul. 98-15 is the amount of effective control the exempt organization partner holds over the enterprise. Tax advisers and nonprofit officers must have a practical grasp of available joint venture structures, and their possible advantages and risks, to avoid costly tax consequences.

Listen as our experienced panel provides a practical guide to the operational and tax impact of joint venture structures between exempt organizations and for-profit companies.

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Outline

  1. Rev. Rul. 98-15 and the IRS position on exempt/non-exempt joint ventures
  2. Criteria for documenting exempt organization control over joint venture operations
  3. Available structures for exempt/non-exempt joint ventures
  4. Alternative approaches to affiliation
  5. UBTI rules as applied to joint ventures and other affiliations
  6. Structuring suggestions

Benefits

The panel will discuss these and other relevant topics:

  • Necessary elements of a joint venture agreement between an exempt organization and a for-profit company to avoid risk to the nonprofit entity
  • Risks beyond UBTI for an exempt organization operating a joint venture
  • Alternatives to a formal joint venture that an exempt organization may consider in partnering with for-profit entities
  • Avoiding UBTI and excess benefit issues in exempt/non-exempt joint ventures

Faculty

Oberly, Ryan
Ryan Oberly

Partner
Wagenmaker & Oberly

Mr. Oberly is a partner in the firm and represents a diverse group of tax-exempt organizations, including public...  |  Read More

Sachs, Elka
Elka T. Sachs

Partner
Krokidas & Bluestein

Ms. Sachs concentrates her practice on the corporate, transactional and tax needs of the firm’s clients. She...  |  Read More

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