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Partnership Nondeductible Programs - Update for Qualification and Reporting

NOTE: At the November 2006 meeting, ABC's board gave unanimous consent to modify rules related to partnership sales. Effective July 1, 2007, subscriptions or single copies sold through programs wherein a magazine is included in the purchase of a good or service and the magazine’s assigned value is not deductible from the purchase price of the good or service, the sale will be subject to Rule F 2.1 Sponsored Sale Rules. Partnership nondeductible sales classification will be eliminated within the ABC rule at that time.

For publications having sold copies through a qualified partnership nondeductible sale program as outlined below prior to July 1, 2007, those copies may continue to be reported under the Partnership Nondeductible category in Pargraph 6 of ABC reports until service expires.

(Reference Rule F 2.6 Partnership Sales for rule and qualification criteria)

Definition of a partnership nondeductible program: A program wherein a magazine is included with the purchase of another product or service and for which the consumer does not have an opportunity to pay a lower price when the subscription is declined, nor is charged a higher price upon electing to receive a magazine.

To qualify as paid circulation, the magazine must be paid for by the partner at an amount of one cent or more per subscription or single copy, net of all other considerations. The sale must also be in compliance with all other provisions noted in Rule F 2.6 - Partnership Sales .

Below is a summary of ABC rules for qualifying magazine sales to be included in paid circulation as “partnership nondeductible. ”

Notification of Magazine Inclusion to Consumer

  • The consumer must be notified of the inclusion of the magazine in a clear and conspicuous manner PRIOR to making the purchase of the good or service with which it is bundled.
    • The presentation to the consumer must be such that the good or service is the primary purchase item.
    • If the magazine is presented as the primary purchase item, then ABC premium rules will apply. See Rules F 8.1 & 8.2 Premiums.

  • The initial notification needs to include, at minimum, the following information:
    • Title of the magazine included
    • Term of subscription (or indication of a single copy)
    • The magazine value

  • Consumer must also be reminded of the magazine inclusion (title, term and value) at the point of sale in a clear and conspicuous manner – the point when the consumer is actually purchasing the good or service.

Magazine Value – Presentation to Consumer

  • The publisher must determine a value for the magazine included with the purchase.
    • The amount allocated must be at least 1¢ or more.
    • The amount allocated for the magazine cannot equal nor exceed the price to be paid for the good or service.

  • The magazine value must be presented to the consumer in a clear and conspicuous manner in all promotional materials.
  • The magazine cannot be represented to the consumer (stated nor implied) as “free,” “no additional cost,” “no extra charge,” “$0.00 value,” “extra bonus,” etc., at any time during the entire transaction.

Price Qualification

  • Since partnership nondeductible circulation is considered a category of “paid” circulation by ABC, Rule F 1.1 Paid Circulation applies.
  • This rule states that at least 1¢ or more must be collected for each subscription or single copy, NET of all considerations.
    • As noted above, the magazine must be presented to the consumer of having a value of at least 1¢ or more.
    • The PARTNER organization that must remit to the publisher, or its agent, a qualifying price of 1¢ or more per subscription or single copy, net of all other considerations.

Limitations

  • The consumer may only receive a SINGLE magazine (single copy or subscription) bundled with the purchase of a good or service.
  • The consumer may be offered a selection of titles from which to choose, however, they may only choose one as part of the bundled purchase.

Reporting

  • Average circulation served from partnerships nondeductible is to be reported separately within the ABC report.
  • Sales generated through partnership nondeductible programs are excluded from average price calculations.
  • The explanatory paragraph will disclose details of all partnership nondeductible sales to include program information and the allocated magazine value.
Any agents or publishers creating partnership nondeductible programs are encouraged to contact ABC to request a pre-qualification review.

Updated November 13, 2006