On May 6, the IRS released Revenue Ruling 2004?51, 2004-22 I.R.B. --, examining an educational joint venture involving a tax-exempt university and for profit company specializing in interactive video training programs. The parties form a joint venture through which teacher training seminars will be conducted. The university controls the educational content delivered by the joint venture while the for-profit company is primarily responsible for presentation of the material and technical support. The joint venture is conducted though a limited liability company governed by a six person governing board split equally between representatives of the university and the for-profit company. Based on these facts, the IRS concludes that (i) a joint venture that represents an insubstantial portion of a tax-exempt organization's overall activities will not adversely affect the tax-exempt status of the organization and (ii) the joint venture under review contributes importantly to the educational mission of the university and will not produce income subject to the unrelated business income tax. Coupled with the decision reached in the St. David's case, Rev. Rul. 2004-51 offers interesting opportunities to health care organizations seeking joint venture relationships.
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