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Nonprofit Law/501c form 1023 necessity

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Question
I am really confused about the 1023 and if it is necessary for us to file one.  We are a bowling tournament whose entry fees exceed $5000 annually.  Entry fees are returned to the bowlers as prize monies with the exception of the fees paid for lineage to the participating bowling center and expenses which include mailings, printing, paper, etc.  My questions is are all entry fees considered receipts which would require us to spend the $400 and file the 1023?

Answer
If you want to claim the benefits of 501(c)(3) organization status you would need to file Form 1023 application for exemption and be approved.  Referred to in regulations as to which exempt organizations are required to file certain form 990s, citing to Treas. Reg. 1.6033-
2(g)(4)), the IRS defines the term "gross receipts" for exempt organizations at
http://www.irs.gov/Charities-&-Non-Profits/Gross-Receipts-Defined as, "the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses." Entry fees, therefore, would be included in gross receipts.

If you don't want to file form 1023 and pay the filing fees, why don't you spin off that tournament into a nonexempt entity?  It does not appear to me, from the facts that you sent to me that the organization would qualify anyway as a 501(c)(3) organization (unless the activities are for youth, handicapped persons or seniors). Even if for one of those groups, what would be the benefit of having 501(c)(3) organization status for your operation?

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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