In Taxation of Exempts Article, Akin Gump Lawyers Examine Joint Ventures as Partnerships

Taxation of Exempts, a journal of Thomson Reuters, has published the article “To Partner or Not to Partner—It’s an Exemption Question,” written by Akin Gump tax partner Ron Nardini and associates Menachem Danishefsky and Ekaterina Lyashenko. The article examines the issue of nonprofits that hold valuable intellectual property forming joint ventures with for-profit companies as a way to monetize such IP and discusses the constraints placed on the scope of such ventures by the tax law.

The authors begin by describing the relevant tax issues for such joint ventures, noting that one of the issues involves “whether the income from the joint venture will be considered unrelated business taxable income (UBTI),” since that income “is subject to tax even if the organization’s tax-exempt status is otherwise preserved.” The article then looks at joint venture partnerships, including those formed through a corporate entity and how they have been treated in the past.

Nardini, Danishefsky and Lyashenko also discuss concerns related to UBTI and structuring alternatives that may be used in forming a joint venture, which can face “material constraints” on their scope because of the tax law. While they can be more difficult to structure through a partnership, the authors suggest there could be some new structuring opportunities found through the use of a taxable subsidiary. Once in place, they observe that “additional structuring could potentially be used to reduce the amount of UBTI that is incurred.”

To read the full article, please click here.