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Nonprofit Law/Requirement of youth organizations

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Question
I have recently taken over the management of a high school hockey team in Delaware.  In our area, this is considered a club sport.  We have an EIN for banking purposes (collecting money to pay ice fees).  We do not have board members.  Is it a requirement of clubs to incorporate and/or gain non profit status?  Does the club have to file tax returns if the EIN is being used simply to collect and pay fees?

Answer
You have what is called an unincorporated association and the IRS does not require unincorporated clubs to incorporate or obtain exemption determination when the requirements that we discuss below are fulfilled.

The IRS explains that, when applying for the Employer
Identification Number, the club may check the line for "banking
purposes only" and gives the examples, "a bowling league for
depositing dues or an investment club for dividend and interest
reporting)."
http://www.irs.gov/pub/irs-pdf/iss4.pdf on page 4 on the right
column near the bottom

Donations will not be deductible, but the fund will not have
taxable income if its only income is donations or fees and no
profit goes to any insider and it conducts no activities other
than disbursements for expenses.

Other examples are given by the IRS for "Banking Purposes"...
"In order to open a bank account to deposit funds from a
fundraising event, memorial fund, bowling league, or other non-
business purpose, the bank may request an EIN be assigned for
identification purposes."
https://sa2.www4.irs.gov/modiein/individual/help/glossary.jsp#B

In the online EIN application, which you may have used, we find, during the procedure as to "banking purposes only"
---Start of Excerpt--
   * These organizations are comprised of sports teams or clubs
primarily participating in live sporting events before a non-paying
audience.
   * Examples of sports teams include bowling leagues, little
leagues, soccer teams, basketball teams, etc.
   * These groups generally need an EIN for banking purposes or to
satisfy local law.

What it is not...
   * They are not engaged in an activity that is for profit.
   * They are not incorporated.
   * These teams or leagues are not professional teams or
franchises.
   * Sports team participants are not paid for playing in the
sporting activity.
---End of Excerpt--

Narcotics Anonymous advises affiliates who have obtained an EIN
(Employer Identification Number, also known as the taxpayer
identification number) for banking purposes only:
--- Start of Excerpt ---
Any NA group that acquires an EIN should consider that the IRS
could at some point in time contact them and request valid
financial activity information. This is one reason that NA groups
will want to maintain detailed records, including treasurer's
records, bank statements, receipts and any other documentation of
their financial activities. We suggest that NA groups maintain
accurate financial records by using the group record worksheets in
the Group Treasurer's Workbook. The worksheets and other above
mentioned records should be kept for at least five years. Care
should be taken when assigning responsibility for storage of the
records, so that they remain available to the group if needed.
---End of Excerpt---
http://www.na.org/?ID=bulletins-bull32

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about 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 questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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