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Nonprofit Law/Possible lose of Tax Excempt Status and Liabilities

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QUESTION: Our membership based youth sport non-profit organization personally selects certain junior club members, and then separates themselves by creating a "separate activity" from the rest of the junior club activities:  There are junior club members who participate in individual competition events that represent our club, and there are also certain junior club members who are then selected to participate in "group team" events that go on and represent the club.

All junior club members pay the same amount of monetary dues each year, whether they participate in an individual event or a group event, and they are all entitled to participate in "all" club activities, especially if they choose to represent our club.  This hand picked group that represents our club in team events, is not a full representation of our junior club membership.  If club members are "qualified" to participate in these group team events, it doesn't feel right that our charitable organization can personally select some junior club members over other junior club members for certain club activities,and not for other activities.

This has upset a number of junior club members and they feel it isn't right or fair considering it is a non-profit charitable organization.  Can this organization possibly loose their charitable tax exempt status because of the perpetuation of unfair advantages?  And is this organization putting our club at risk of liability by condoning unfair advantages within this organization?  (It seems if this non-profit wants to separate this personal selected group of junior club members, from other junior club members, they should file a "separate Incorporation" under the umbrella of their primary club Inc. for possible liable situations that could come up)

ANSWER: A youth sporting organization may decide to fund athletes differently depending upon, for example, their skill level or their team level.  Just like a private high school might fund its varsity football team at a higher level compared to their junior varsity team.

Of course the organization can not fund youth differently if the higher funding is based upon some prohibited reasons, such as the family's fundraising for the group or race or religion.

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: Skill level for this organization is defined by the sports governing body.  If skill level is equal between the selected group, and it is simply a matter of preferential treatment between club members, is this legal?

ANSWER: Does the nonprofit receive benefits from a governmental agency?  For example does it receive reduced rates for the use of the playing fields owned by that government?  After you give me that information I will reply further.

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: I'm sorry for the misunderstanding. When I say governing body of this sport, I am referring to a member club of US figure skating, for example.  If you are at a skill level defined by US figure skating then you qualify to be part of a group team.

Answer
I am not asking about the governing body of the sport.  I am now asking whether the nonprofit receive benefits from a governmental agency?  That is probably the only way that there would be a law that would regulate the private organization's activities.

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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