<em>Legally</em> <strong>Speaking</strong>
 
 

 

Charitable organizations 101
Jim Juliano - Fall 2004

A charitable organization may be a good fit for any sports venture, such as a baseball team. It can help meet important local needs and, at the same time, improve the team’s community relations.

Donations to a charitable organization are tax deductible for the benefit of the donor. The owner of a team and anyone else may contribute and deduct the contribution as a charitable donation.

A charitable organization has many opportunities to join with other organizations to sponsor community activities, such as golf tournaments, banquets and fund-raisers. It is a good way to build community relationships for the team.

Establishing a charitable organization requires careful planning and consideration. Most charitable organizations are not-for-profit corporations under state law. The mission and purposes of the organization as set forth in the articles of incorporation should be drafted only after review of the proposed activities and budget.

Filing the articles of incorporation with the state does not by itself make the corporation a charitable organization for IRS purposes. The next step—and it is a large step—involves the completion and filing of IRS Form 1023, a multiple page document that requires many details about the organization, its management, its business plan and its budget.

The purpose of the IRS inquiry is not complex: The IRS wants proof that the organization serves the needs of the public and that it will be managed in a fiscally responsible manner.

The IRS seldom approves an organization without correspondence and often requests additional information or even modification of the business plan before it recognizes the organization as a charitable entity. During this time, which can last more than a year, the organization may accept contributions, but it must clearly notify the donors that its application for charitable organization status is pending with the IRS.

The charitable organization must conduct its business separately from the business of the baseball team. The team and the charitable organization are separate entities, and the parties must treat them that way. Funds must not be commingled.

The charitable organization may be a good addition to your community and to your baseball team’s activities.

 

 
 
 
 

This website contains general information that should not be considered legal advice or legal opinion concerning individual situations. Legal counsel should be consulted for specific advice.

Copyright 2004 by L. James Juliano Jr.
Legally Speaking® is a registered trademark of the law practice of L. James Juliano Jr.