The Internal Revenue Service isn't usually the U.S. government's
most popular agency this time of year, but it has some new fans
among tour operators and agents.
That's because new tax rules the IRS just issued tightened
loopholes that allowed nonprofit organizations to use their
tax-exempt status to package tours that directly compete with
products offered by for-profit operators.
For years, trade groups such as the National Tour Association
and ASTA have been complaining that the IRS's Unrelated Business
Income Tax rules were unclear and consequently unfair. They claimed
that some nonprofits were being granted tax exemptions and other
benefits on tours that they promoted as "educational" travel
packages when, in fact, the educational part of the tour was
provided by a third party.
Under new rules issued last month, tax-exempt status will be
granted only if the nonprofit group takes an active role in the
educational part of the tour, rather than merely making travel
It's tough enough competing on a level playing field in this
business. Thanks to the new tax rules, agents and operators won't
have to battle nonprofit groups that profit from an unfair
The IRS isn't the only government body coming to terms with the
trade. After years of battling the Society of Travel Agents in
Government (now the Society of Government Travel Professionals, or
SGTP), the Defense Department finally capitulated and agreed to let
agents charge fees for servicing its $3 billion in travel.
Although details have yet to be worked out, the DOD acknowledged
that airline commission cuts have made fee-based pricing
Kudos to the SGTP for fighting the good fight.