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Raising Revenue and Diversifying Services Through Joint Ventures with Businesses and Other Nonprofits
Caplin & Drysdale
Raising Revenue and Diversifying Services Through Joint Ventures with Businesses and Other Nonprofits
Exempt organizations are finding that partnerships with businesses or other nonprofits can bring them revenue or functional capacity they never had before. We have worked with both nonprofit and for-profit clients to arrange joint ventures and ensure they do not jeopardize the nonprofit partner's tax-exempt status or produce other adverse tax consequences for the nonprofit, such as receipt of unrelated business taxable income. An increasing number of these joint ventures involve using the Internet for mission-related activities, lobbying, fundraising, or commercial exploitation of intellectual property. We have anticipated these developments and are working with our tax-exempt clients to shape government policy to accommodate Internet-based joint ventures and other activities.

Representative Engagements

  1. A for-profit company selling products over the Internet wanted to build alliances with well-known charities by offering items specially for their members and supporters. It needed advice on how to reassure the charities that working with the company would not result in UBIT or, worse, loss of exemption.

    Result: Caplin & Drysdale helped the company design the terms of the alliance and the materials to be used with the charities and then provided an opinion on the tax consequences. Using the opinion, the company was able to attract one of the country's largest and best-known charities as a partner within a few months.
     
  2. A large national charity was approached by a for-profit company about turning one of the charity's Web sites into a profitable business through a joint venture.

    Result: Caplin & Drysdale recruited and coordinated a multi-disciplinary team to advise the charity on how to structure the transaction, and then led the charity's negotiation team. After negotiating a highly favorable deal for the charity, Caplin & Drysdale advised the charity on closing and implementing the transaction and provided an opinion on the pertinent tax issues raised by the transaction.
     
  3. A charity that had developed an extremely valuable database and Web site wanted to explore the potential for using venture capital and/or a strategic alliance with major technology companies to finance significant improvements to its technical, marketing, and customer service capabilities.

Result: Caplin & Drysdale helped the client assess the legal and operational implications of a range of alternative structures and negotiated with potential venture partners on behalf of the charity.

Our Services

If your exempt organization is contemplating a joint venture, we can help you structure the deal to:

    • Protect your organization's tax-exempt status
    • Minimize UBIT
    • Protect your organization's name and other valuable intellectual property
    • Assess any special tax consequences of Internet-based transactions

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