AboutHarvey Mechanic Expertise Federal tax issues of nonprofit 501(c)(3) public charities only. Establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer question about Nonprofit's Unrelated Business or how to fill out forms. This forum is only for legal questions about a specific nonprofit asked by members or those otherwise directly effected by the specific nonprofit organization.
Experience I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar.
Expert: Harvey Mechanic Date: 7/22/2008 Subject: Swim Team non for profit status
Question Hi,I am very involved in our swim team which is in Illinois. I work very hard to increase our revenue through our concessions. We have a swim team board, but we are also goverened by our neighborhood association board. No one is paid, we are all volunteers. Every other subdivision pool around us with swim teams are non for profit, but some how I was told we can't be. Whatever money we make we use to pay for upkeep of the swim team items, updating equipment, coaches salaries, swimmer parties etc. We should be exempt. The treasurer of our association is firm when he says we cannot be a non for profit organization and thus exempt from paying taxes. Can you enlighten me with some information as to why this might be. I have worked with many non for profit groups and this just makes no sense to me. I would so appreicate a bit of your time with some help. If I was pointed in the right direction, I may be able to help change our status. Thank you so much for your time. This is a great service you are doing for groups like mine that have no money and need every advantage we can get. After all, it is all about our children.
Answer You are welcome.
Well, it appears that you would have an issue that the swim team is government by your "neighborhood association board". If that means that the members of the swim team must come from your neighborhood, then the IRS would not grant 501(c)(3) organization status.
See www.irs.gov/pub/irs-pdf/p3833.pdf starting on page 5 (which is pdf
page 7 of that pdf file) "Charitable Class"
However, the team may be qualified under section 501(c)(7) organization as in
www.irs.gov/irm/part7/ch10s10.html
but then donations would not be deductible (donors to 501(c)(3) organizations do get tax deductions).
The issue of concessions may be an issue with either type of nonprofit organization. See www.irs.gov/pub/irs-pdf/p598.pdf
IRS Publication 598 "Tax on Unrelated Business Income of Exempt
Organizations" and there you will see that such activities are
generally taxable.
Harvey Mechanic
Attorney At Law
Harvey108@hotmail.com
