Corporate Sponsorship, Football Bowl Games, and the Internal Revenue Service

Article excerpt

Holiday college football games have become a part of our American cultural heritage. Wallendorf and Arnould |14~ suggest that American holidays have unique rituals that are traditionally followed. Just as we consider turkeys to be artifacts of Thanksgiving and gifts to be linked to Christmas, we consider college football bowl games to be a part of New Year's Day. The bowl organizations that are designed to arrange and conduct college football games usually qualify as tax-exempt organizations under Section 501 (c) (4) of the United States Internal Revenue Code. Bowl organizations are required by their organizational documents to pay a substantial percentage of their gross revenue to the school competing in the game.

A recent development in promotion management has been the corporate sponsorship of major college football bowl games as well as other events such as: music, opera, education, auto racing, and cycle racing. Corporate sponsorship is becoming a strategic component of the organizations promotion/communication mix, competing for corporate resources with the more traditional forms of promotion such as advertising, personal selling, and public relations |11~. Several studies were conducted to assess the motivations and objectives of corporate sponsors. Waite's |13~ and Quinn's |12~ studies as reported by Meenaghan |11~ were of major British and Irish firms respectively, while Abratt, Clayton, and Pitt |1~ assessed the motivations of corporate sponsors in South Africa. The findings of all three studies concur that corporations sponsor events with the objectives of: brand image enhancement, corporate image enhancement, and the generation of general public goodwill. Hastings |5~ supports these findings suggesting that the communication effects of advertising and sponsorship are different, with sponsorship designed to enhance both brand and corporate images.

Meenaghan |11~ suggests that sponsorship has become more important to corporations due to:

* government policy banning the advertising of some products such as cigarettes;

* rapidly rising advertising costs;

* favorable tax treatment of the subsidies.

Corporate sponsorship of college football bowl games has enabled the bowl organizations to compete and bid for the highest ranked college teams. Higher ranked teams guarantee higher television ratings, generating increased status and revenues for the bowl organization. At least one of the major bowls, the Cotton Bowl, has even changed its name to include the name of its corporate sponsor, Mobil Cotton Bowl.

A Donation or an Exchange?

Is the corporate sponsorship of sporting events a donation, with the goal of creating goodwill and generating favorable publicity or is it a fee paid for advertising? Meenaghan |11~ defines sponsorship as "the provision of assistance either financial or in kind to an activity by a commercial organization for the purpose of achieving a commercial objective." This definition suggests that corporate sponsorship would be classified as an exchange and not a transfer or donation using the definition of exchange developed by marketing theorists Bagozzi |3; 4~ and Kotler |9~. Corporate sponsorship of college bowl events meet Kotler's |9~ five criteria that define an exchange: (1) at least two parties enter into the sponsorship agreement;

(2) both the bowl organization and the corporate sponsors offer value to the other;

(3) the parties are able to communicate;

(4) sponsorship agreements are undertaken on a voluntary basis by both the bowl organization and the corporate sponsor;

(5) both the bowl organization and the corporate sponsors believe that the agreement is in their own best interest.

Meenaghan |11~ contrasts sponsorship with charitable donations and patronage which lack one or more of the elements of exchange.

A corporation does not expect a substantial benefit in return for a "donation" and therefore the tax-exempt organization receiving the donation is not subject to federal income tax. …