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Nonprofit Law/Quick & Easy Booster start up

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QUESTION: We have a Baseball Program (Varsity & JV team for our high school) that has NEVER had funds raised outside of the high school.
We have begun raising money for the Program this season, when I saw 'we' it is a group of parents & volunteers that I am heading, with help from the Head Coach & his staff.
Do we have to call it a Boosters Group or can it be a Fundraising Group?
Depending on the name or type of group, is there anything I need to be sure we are doing? Like so we need a board with positions (like president), etc.
I'd like to open a bank account, I was told I need to create a tax id.
What's the fastest & possibly free way to do this?
Since we are raising funds for the team, can we be non-profit so we don't have to pay taxes?
Any guidance you can provide with the quickest & cheapest methods would be greatly appreciated.

ANSWER: You can call it a Fundraising Group.

If you want donors to be able to deduct donations and not
to have your sales income, if any, taxed as long as you
comply with fundraising guidelines for 501(c)(3)
organizations, you would need to establish a charitable
trust, incorporate under a state's nonprofit corporation
law, or set up an unincorporated nonprofit association.
Your organizing document would need to state that it is
organizing under Internal Revenue Code Section 501(c)(3)
and have other required clauses. You would have at least
3 directors, with control of the board not in related
persons.

  After the initial set up, you would need to apply for
a EIN (tax id number)
http://snipurl.com/gij28
and then you could apply for the IRS exemption
determination letter which could be effective
retroactively to the date of establishment of the
organization. The IRS minimum filing fee for such a
determination letter is $400 and goes up to $850.
http://goo.gl/X2UkK

See the IRS Publication 557 "Tax Exempt Status for Your
Organization" at:
http:// www.irs.gov/pub/irs-pdf/p557.pdf
in the right column on page 25 under "Organizations Not
Required to File Form 1023" discusses who does not need
to file and among those is "Any organization (other than
a private foundation) normally having annual gross
receipts of not more than $5,000.  These organizations
are exempt automatically if they meet the requirements of
section 501(c)(3)."

The organization must have certain IRS-mandated clauses
in the organizational document even if your organization
is not required to apply for federal exemption but if you
want the benefits of being an exempt organization.
See, starting in the middle column of page 26 of
Publication 557  under "Organizational Test". Samples
start on page 77 and the IRS discusses some of the
textual requirements for the organizational document
starting in the middle of page 26 of their Publication
557 and going through the paragraphs under the heading
"Dedication and Distribution of Assets" on page 27.

Also you must operate as a 501(c)(3) organization (see
that Publication 557 for the general rules).

My summary of IRS regulations relating to 501c3 booster organizations is at http://goo.gl/RO1ez -- you may be interested to read that.

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.    



---------- FOLLOW-UP ----------

QUESTION: Thank you very much for that information. You discuss an 'organizing document or organizational document' in your response. Can you provide a reference or information on how that needs to be created or set up?
Thank you

Answer
See the samples on starting on the page 77 of that IRS Publication 557 where there is a sample of a nonprofit corporation followed by a sample of a charitable trust.  You requested "Quick and Easy".  The charitable trust is quicker and easier, as you don't need to file with the State and pay filing fees as you would for a nonprofit corporation.

The reason that I generally recommend the trust for nonprofit
organizations is that it is easier to establish a trust (no need
for state incorporation) and there are less (or no) on-going state
filing requirements for a trust in comparison with a nonprofit
corporation.  In addition, the state does not generally have
mandates as to the internal operation of the trust as they do for
nonprofit corporations.  For example, some states require annual
meetings of corporate boards, whereas trustees are not required to
have any annual meetings or even bi-annual meetings.
That is explained on page 20 of a Yale Law Journal article, "The
Secret Life of the Trust" by John H. Langbein, Sterling Professor
of Law and Legal History at Yale University  which is available at
http://goo.gl/rpDBi

"The flexibility to eliminate governance procedures that are
obligatory under the corporate form has been one great attraction
of the trust form...The trust's inherent flexibility for tailoring
beneficial interests and mechanisms of governance reflects, I
think, the origins of the Anglo-American trust as a donative
transfer. If you start with the root principle that the owner of
property has absolute freedom to give it away as he or she pleases,
there seems no basis for interfering with this liberty to make
arrangements for giving the property away less than absolutely-no
reason, in other words, for preventing the donor from tailoring
whatever organizational regime the donor cares to devise for
implementing the gift."

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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