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Nonprofit Law/team registration taken away

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QUESTION: Are you required to apply for exempt status for a traveling sports team?  The paperwork/process is horrific!  Thanks!

ANSWER:  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 persons
related by blood, marriage or other business.

  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/TXwq9

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 p age 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)."

If your traveling sports team does not require that donors be able to deduct donations and if the team does not have any sales income, then it would not need to be organized as a 501(c)(3) organization or obtain IRS determination as to exemption.

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: Do we have any legal ground to demand the return of a DBA & 501(c) acquired for our team, but is now being used for another team; on the grounds that it's in the person's name that split from the team?

ANSWER: First you need to find out what entity registered the DBA and who controls that entity.  For example, if it is a corporation, find out who are the Board members as they control who uses the entity. If it is a sole proprietorship, as it may be from what you wrote, that individual would control the use, absent some contractual obligation.

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: What about if the funds used to acquire the tax exempt status were from the original team and not new team that split off?

Answer
I would need to look at all of the facts and circumstances, but, if the original team paid for something it should have ensured its own control.  Possibly, however, if it lost control, the persons who took control, may be determined by a court to be holding it on behalf of the original team and would be ordered to give control to the original team.

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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