May 27, 2004 | Read Time: 1 minute
The IRS has issued a revenue ruling that explains how charities should structure their business partnerships to maintain their tax exemptions. Revenue rulings from the IRS are designed to help the public by stating the government’s official position on aspects of tax law.
The ruling offers the hypothetical example of a university that runs seminars for teachers and forms a partnership with a company that conducts interactive, video-training programs. The university and company each hold a 50-percent stake in the partnership, and half the seats on the partnership’s board.
The IRS says that the university may maintain its tax-exempt status under such a structure. In addition, the IRS says, the charity need not pay unrelated-business income tax on the income because the activity furthers the organization’s educational purpose.
Revenue Ruling 2004-51 will be published in the June 1 Internal Revenue Bulletin. A copy of the ruling is available online at http://www.irs.gov/pub/irs-drop/rr-04-51.pdf.
