PubLedge

On the facts represented, an incentive-fee management contract between a §501(c)(3) bond issuer and a hotel manager — where the incentive fee is calculated on gross revenue subject to an adjustment contingent on a net-profit-variant metric — does not constitute sharing of net profits under Rev. Proc. 2017-13 §5.02(2) and therefore does not cause private business use under IRC §141. The ruling applies only to the requesting taxpayer on the specific facts presented.

What Counts

• Base fee plus incentive fee structure
• Incentive fee primarily tied to gross-revenue metric
• Adjustment mechanism that is one factor among several, not a direct net-profits share
• Contract otherwise conforming to Rev. Proc. 2017-13 safe-harbor parameters
• Reliance only by the requesting taxpayer on the represented facts

What Does Not Count

• Contracts with different compensation structures, even if facially similar
• Third-party reliance (barred by §6110(k)(3))
• Material changes to the represented facts or the Rev. Proc. 2017-13 safe-harbor parameters

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