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Nonprofit Law/do we need a 501 (c)(3) for sponors?

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QUESTION: I work at a gymnastics facility, the parents want to try and get sponsors for their kids to help with the expenses. We do not have a 501c3. Do we need to have one? Also If a company wants to sponsor the whole team and not an individual gymnast can we do that with out a 501 c3?
Thank you in advance for your time.

ANSWER: Certainly the parents may try to obtain sponsors for their kids. However, normally a company does not want to donate to families directly because they can not use that as a business expense unless they get something commensurate in return, for example advertisements on the kids' jerseys. If the kids want to make such an exchange they may certain do that.  The company may sponsor the whole team and not just individuals.

Note that, if there was a 501(c)(3) booster organization, then the sponsor would be able deduct donations to benefit the whole team, even if they do not get something in return, like advertisements.

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. For me to consider your individual situation and how the law applies, I would need to gather more information.

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

QUESTION: So if we as a business offer advertisement (banner, plaque,name on shirt etc....) in return for Sponsorship/donation of our individual gymnasts or team, the company(aka;sponsor) is getting advertising in return, instead of using the sponsorship/donation as a write off? Then would the company I work for be responsible for claiming the tax on the donations received?
If so, can that money come out of the donation?
Example: John Doe donates $500.00 to Susie's gymnastics account, we give him a plaque on the wall and his name on a t-shirt. Does Susie's parents pay tax or does the business pay tax? If so can the tax money be taken off the donation amount and put in an account until tax time?
Thank you for your patience with me! It is greatly appreciated :o)

Answer
There are two scenarios.

1.  The company gives the money directly to the families in exchange for advertising, or
2.  The company gives the money directly to the for-profit gym in exchange for advertising.

In either case, the money received is taxable as service income or employment income.

In your example, the sponsor gave the $500.00 to your for-profit gym for the use of the kids who attend the gym, then the for-profit gym is receiving taxable income just as if the kid's nuclear family had paid the $500 to the gym or the uncle of the kid had paid the gym the $500 for the kid's tuition.

I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. I was willing to answer some basic questions even though your issues are not related to any 501(c)(3) organization.  If you want other advice as to your business tax matters I would be charging a fee and, if want to hire me, please email me directly to my email address below.

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. For me to consider your individual situation and how the law applies, I would need to gather more information.

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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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