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Nonprofit Law/Youth Basketball Team

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Question
I'm trying to help my sons Coach to setup a 501C(3) entity so he can accept donations from companies to support his organization.  He is a 19 year old boy volunteering his time to coach a semi competitive team of approximately 15 boys.  The problem is several of the boys don't come from the best of circumstances and can't afford the weekly tournament fee of 16-25 dollars each.  What he is doing is amazing for a kid his age.  He has been footing the bill for those boys who come from low income families.  He is currently in college and works a part time job.  He would like to ask for donations, but we know it donations would be more forthcoming if there was the possibility of a tax deduction.

We live in Oklahoma.  The boys practice once a week for 2 hours at the coach's church at no cost.  We have tournaments most weekends. Where should we start and do you think this type of entity we'd like to create would qualify for tax exemption.  We need help, and the cost of an attorney to get this process going would be too much of a financial burden on the coach and myself.  I also want to ensure if one of the boys was injured playing basketball no one would try to hold him responsible.

Thank you

Answer
Certainly such an organization would be able to qualify for 501(c)(3) organization status.
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).
The Application for Exemption is at:
http://www.irs.gov/pub/irs-pdf/f1023.pdf

Both the nonprofit corporation and charitable trust would protect him against liabilities of the organization.

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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