A joint venture is any joint ownership or contractual arrangement between the University and one or more parties that are not exempt from federal income taxation, through which there is an agreement to jointly undertake a specific business enterprise, investment, or exempt-purpose activity. A joint venture does not include arrangements intended primarily to generate income or the appreciation of property, if substantially all of the income generated by the arrangement consists of investment income (e.g. dividends, interest, annuities, royalties, rents, and capital gains). The University negotiates terms and safeguards to minimize income from the joint venture being classified as unrelated to its tax-exempt purpose (and thus subject to unrelated business income tax, or UBIT) and to protect its 501(c)3 tax-exempt status. Tax-exempt entities like WFU that engage in joint activities with for-profit companies must meet two criteria for any income from the joint venture to be treated as exempt: 1) the joint venture must serve primarily to further WFU’s exempt purposes, and 2) the parties’ agreement must explicitly provide that the primary goal of the joint venture is the advancement of WFU’s tax-exempt mission and only incidentally for the benefit of the for-profit party. The ability of the University to exercise sufficient control over the JV is thus of critical importance.

All proposed joint ventures should be reviewed by the Legal Department for compliance with tax law and regulations before being entered into.

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