Royalties and sponsorship payments: Are they tax exempt?
Many tax-exempt organizations allow for-profit entities to use the organization's name or logo to market goods and services.
Often, these agreements are structured as royalties because royalties are generally excluded from the definition of unrelatedbusiness taxable income (UBTI) by the IRS.
Unfortunately, the term "royalty" is not defined in the tax law. The regulations simply provide that whether a particular item of income is a royalty must be determined by the facts and circumstances of each case...