August 27, 1998 | Read Time: 1 minute
An I.R.S. proposal designed to help explain when universities, museums, and other tax-exempt groups can sponsor travel tours without paying income tax on trip revenue has drawn mixed reactions from organizations that have filed comments with the government.
Non-profit groups must pay unrelated-business income tax on income from activities that are not “substantially related” to their charitable mission.
In proposed regulations recently released (The Chronicle, May 7), the I.R.S. stopped short of laying down firm rules for when unrelated-business tax must be paid, saying that whether tour activities are substantially related to a group’s mission depends on looking at “all relevant facts and circumstances.” The proposed rules give examples to suggest how the agency would treat different kinds of charity-sponsored travel arrangements.
The proposal disappointed the Travel Council for Fair Competition, a coalition of trade associations for members of the for-profit tourism industry.
The travel council told the I.R.S. that the proposed regulations were “seriously flawed” and should be withdrawn and replaced with guidance that sets forth more-objective standards.
The coalition asked the Internal Revenue Service to provide more examples, spell out “the relevant factors that bear on taxability,” assign weight to those factors, and specify the types of records charities should keep to prove they have “integrated” their tours with their exempt purposes.
The American Association of Museums generally praised the I.R.S. proposal. “Our research shows that the great majority of museum travel programs are heavily dependent on close relationships with travel agents and tour operators,” wrote Patricia E. Williams, acting president of the association. “Far from competing with travel professionals — let alone competing unfairly — museums are working with them to create and market an attractive and educational travel product.”
