The following information is gathered to assist member leagues and clubs in making application to the Federal Government for the purpose of obtaining a 501(c)(3) non-profit, tax exempt status by the Internal Revenue Service.
A. Federal Tax Status
1. STYSA has been granted Section 501(c)(3) Group non-profit, tax exempt status by the Internal Revenue Service. Contributions and gifts to STYSA are tax deductible to the extent applicable under current law. Like all others granted such status, STYSA must file an annual information return with the IRS. Each state and local association with §501(c)(3) status must also file a return. Failure to file a return can lead to reclassification of the group as a private foundation. This can lead to severe tax problems for the organization as well as subject it to fines.
2. STYSA members included on the STYSA Named Subordinate Listing submitted to the IRS are covered under the STYSA 501(c)(3) Group Exemption. Each STYSA member must obtain their own seperate Tax ID number and provide that number to STYSA in order to be included on that listing.
3. STYSA must file wage reporting documents just as any business might. Failure to collect and pay social security and income tax withholding would subject the organization to penalties and interest. Failure to properly handle wage taxes can lead to personal liability for the organization’s directors, officers and administrators for payments due IRS.
4. STYSA must also report payments to individuals contracting work with the association if payments exceed $600.00 per year. This includes persons paid for working at state camps.
5. Frequently, local soccer organizations apply for §501(c)(4) status. This generally happens when the attorney or accountant handling the application does not realize §501(c)(3) is available. A §501(c)(4) organization does not pay income tax, but donations to it are not deductible. Also a §501(c)(4) organization will fail to qualify for other tax and postal privileges that are available for §501(c)(3) groups.
6. To assist member leagues, the following are sample reposes to the questions on the §501(c)(3) application. These responses were prepared by the General Counsel of USYSA.
B. Non-Profit Status
1. STYSA has a non-profit mailing permit issued by the U.S. Postmaster in Georgetown, Manor and Dallas, Texas. Approval of permits is at the discretion of the local postmaster. A permit is issued only for the location of that postmaster; therefore STYSA can presently mail by bulk rate from Georgetown, Manor, and Dallas, Texas.
2. Each local association must make its own application for a non-profit rate permit. The association must already have its §501(c)(3) exemption before applying for the non-profit rate. The USYSA General Counsel strongly recommends that the application form and supporting documents be personally delivered to the local permit supervisor.
3. The non-profit rate is good only for bulk mailings of at least 200 pieces of mail. Special and somewhat complex rules apply to bulk mailings. The post office periodically offers a free seminar in preparing bulk mail. Check with your postmaster for times and dates.
4. A state or local organization may be required to collect sales tax on sales of items to its constituent members. Check with your own attorney or tax authority on requirements and procedures before embarking on a merchandise or publications sales program.
C. State Tax Status and Sales Tax
1. Associations in states which do have state or local income taxes must follow the reporting requirements of those taxing authorities.
2. STYSA is exempt from payment of sales tax in Texas. Special exemptions for events can be obtained on a case by case basis in some states. Exemption can be granted in some states based on STYSA’s tax status. The STYSA sales tax exemption cannot be used by any other soccer body. STYSA is required to collect sales tax on merchandise sales made in Texas.
3. STYSA is exempt from Texas Sales Tax by using a form for that purpose when making purchases.
4. A league may be able to obtain its own sales tax exemption. The organization must already have a §501(c)(3) exemption from the IRS before it can apply to the state. A sales tax exemption is only good in the state that granted it.
D. Social Security
Employees of USYS, STYSA and local associations are subject to withholding for social security taxes in the same manner as employees of profit businesses. The employer must make certain someone (administrator, office manager, treasurer or some other officer) is responsible for insuring the proper calculation of withholding and timely deposit of the tax funds.
E. Employment Security and other Taxes
STYSA will comply with all legal requirements for Employment security and other taxes.
403 b Annuities
STYSA will comply with a laws relating to tax deferred annuities under the law as 403 b annuities. Those annuities, which are by contract, will be automatic each year. The board will address other annuities in annual Corporate Resolutions.
Please note that the STYSA Personnel Manual also governs this area.
Assistance for Leagues
Proposed Language for §501(c)(3) .I. Exemption Application
The following are suggestions for responses to the questions on Internal Revenue Service Form 1023.
Application for Recognition of Exemption Under Section §501(c)(3) of the Internal Revenue Code. Be sure the application is reviewed by your attorney or a certified public accountant before filing. Let that person also be your representative talking with IRS should any questions arise from your application.
References in this document are to the parts and questions contained on Form 1023. Since the format of the form changes from time to time, please make certain that you match the answer to the correct question.
Part 1 Identification
1. Full name of organization. In this blank put the name of your soccer association as it appears on your Corporate Charter, if you are incorporated. If you are not incorporated, fill in your name as it appears in your constitution. Do not abbreviate words which are spelled out in your charter or constitution.
2. Employer identification number. In this blank insert the employer identification number which has been assigned to you by the Internal Revenue Service. If you do not already have an employer identification number you must file an application to IRS for the number. You need not wait to receive the number before submitting your Form 1023. If you do not have a number, follow the instructions and complete and attach a Form SS-4, and in the block for question 2 type "Form SS-4 Attached".
3. A & B. Insert the address of the organization where you wish to receive the response from IRS. Or insert the principal business address of your association. A question to the right of block 3A asks if you are applying under Section 501(e) or 501(f). Do not check either block.
4. Insert the name and telephone number, including area code, of the person the IRS Examining Agent should contact if there are any questions about the application. This name should be your reviewing attorney or CPA who has completed the application who will be most familiar with what it says.
5. Month the annual accounting period ends. Your first fiscal year probably begins on the first of a month. In block 5 insert the name of the previous month.
6. Insert your date of incorporation as it appears on the charter. Or insert the date that your constitution approved if you are not incorporated.
7. The activity codes submitted with the USYSA application for exemption were 300, 149, and 349. Check the instruction sheet for your Form 1023 to see if these codes are also the most suitable for your organization.
8. A & B. Chances are your organization has never filed income tax returns, in which case, check the ’no’ block. Otherwise the questions are self-explanatory.
If you are incorporated put an X in the block before the word "corporation". If you are not incorporated put an X in the box in front of the word "other". Many applications for exemption run into trouble because the entity submitting the application fails to attach the required copies of the Articles of Incorporation and Bylaws or copies of the Constitution and Bylaws. These documents are required by Part 2 of the application. Please be certain to include them in your application, or it will be delayed in approval. The copies of the Articles of Incorporation should include a copy of the charter signed by your State’s Secretary of State and showing State Seal. It is not necessary to obtain a certified copy of the charter from your Secretary of State. A copy of your original charter will do. The copy of the Bylaws must contain a statement and signature from your organization’s Secretary saying that the preceding is a true and accurate copy of the bylaws of your corporation.
Part 3 Activities and Operational Information
Question 1 Here are suggestions for a response to Question 1 concerning the sources of financial support in order of magnitude:
1. Membership fees from youth players at $ per player per year.
2. Contributions, grants and sponsorship from corporations and other business organizations.
3. Membership fees from affiliated youth soccer associations.
4. Licensing agreements with businesses. You may also wish to add a sentence as follows:
"There is no mass solicitation for financial support or other regularly used format for solicitation of sponsorship."
FROM THIS POINT ON, THE PART NUMBER, QUESTION NUMBER AND THE SUGGESTED
RESPONSE, APPEAR WITHOUT A REPETITION OF THE QUESTION ITSELF
The organization does not have a program for fund raising. The corporation is generally approached by other organizations and businesses which wish to participate in the program or through personal contact by officers, directors, and members of the organization with potential sponsors and contributors.
Be certain to modify this response to suit your situation. STYSA has operated for the past several years as a state association member of the United States Youth Soccer Association. Or as a local league member of the STYSA. The United States Youth Soccer Association, in turn, is the youth division of the United States Soccer Federation. The STYSA was incorporated in Texas on February 3, 1988 as a separate corporation from the United States Youth Soccer Association, Inc. and United States Soccer Federation, Inc. Although it maintains an affiliation with the United States Youth Soccer Association and United States Soccer Federation (the national governing body of soccer in the United States), STYSA will perform its operations separate, and apart from, the United States Youth Soccer Association and United States Soccer Federation. This includes a separate maintenance of any employees and assets. Both the United States Youth Soccer Association, Inc. and United States Soccer Federation have been granted 501(c)(3) status by the Internal Revenue Service. [If you are a local association, include reference here to the state association’s tax status] The organization promotes uniformity in the rules of play and the organization of the sport of soccer in the state of Texas.
It provides directional and instructional materials for the training and selection of players who ultimately represent the United States in amateur international and national soccer matches including the World Youth Cup. It participates in an annual workshop meeting sponsored by the United States Youth Soccer Association, Inc. for the training of your soccer administrators, coaches, referees, and other interested parties. It participates in modifications to the International Rules for the support of soccer which are applicable to youth players in the United States. It reviews and approves travel by youth amateur soccer teams from its state to other states and other countries to play affiliated youth amateur teams in its state. It provides registration forms and membership cards and player passes for the registering of players and for identification. It provides formats for operating procedures, bylaws, charters, design of fields, and other instructional materials. It supervises a state [or local] tournament for the identification of state [local] champion teams who participate in regional and national tournaments. It selects players from its state to participate in regional and national training camps for those players identified as superior players who may ultimately represent the United States in national or international amateur youth soccer matches. Actual organization and provision of facilities for these tournaments and camps are made by local organizations, colleges, or other entities who bid for the privilege of hosting.
A and B
On the form, I suggest, you state "see attached list" and on a separate blank sheet of paper headed Part 3 Question 4 (a) and (b) you should list the names and addresses of each of your officers and directors. You do not need to list specialized knowledge for each individual person. Instead use the following statement: "Each of the above have been elected to hold their office on the basis of their previous experience and training as youth soccer coaches, referees, or administrators. Their duties are typical of organization officers and are stated in more detail in the bylaws of the organization which are attached to this application."
C through F
Your answer to all of these questions should be no. If you have any doubt concerning the response to any of Question 4’s subparts, you should talk with your local lawyer or you may call the USYSA General Counsel.
Mark both boxes "yes" and beneath put "see attached explanation". On a separate page titled
Part 3, Question 5 insert the following paragraphs:
The organization has a special relationship with the United States Soccer Federation (the national governing body of soccer in the United States) and the players of the United States and corresponds with the youth division of the United States Soccer Federation [and the state association]. As such our organization has voting rights within the [state association] United States Youth Soccer Association, Inc. and the United States Soccer Federation. Certain officers and directors of our organization may be committee chairmen or may hold other positions in the United States Soccer Federation and the United States Youth Soccer Association, Inc. [and the state association], through its affiliation with the United States Youth Soccer Association, Inc. and the United States Soccer Federation, our organization is affiliated with Federation Internationale de Football Association (FIFA), which is the international governing body of soccer. The rules of play of the game are set by FIFA, but the rules are modified by the United States Youth Soccer Association, Inc. and our organization with regard to the play of the game in our state by players under the age of nineteen years. The United States Youth Soccer Association, Inc. exercises a measure of control over its member state youth soccer associations in that the constitution and bylaws of each member state association must be approved by the United States Youth Soccer Association, Inc. Also, member individuals and organizations have a right to appeal any complaint or grievance which they may have at the local and state level with the United States Youth Soccer Association, Inc. at various levels of appeal set out in the bylaws. These rights of appeal are required as a result of United States Soccer Federation’s membership in the United States Olympic Committee.
A. "Office equipment, registration cards, registration materials, and pamphlets promoting the aspects of the sport of soccer."
A. See response to Question 3.
B. Check yes and insert the following:
Charges are based on the anticipated operating expenses of the organization to provide the services it provides. The present fee for each member is $ per year. The present fee for an affiliated local association is $ per year.
A. Check yes and insert the following which will probably need to be attached as a separate page: "A player who registers to play soccer with a local soccer program participating as a part of the state youth soccer association pays a $ membership fee. A local association which has applied for membership and whose charter, constitution, bylaws, and rules of play (as may be applicable) have been approved by the Executive Committee of our organization can be admitted to membership, and the present fee is $ per year.
B. Our organization periodically has provided pamphlets to affiliated local soccer programs for the promotion of the sport, but there are no present or proposed efforts to attract members to the organization.
C. Check the no box and add: "Services of the organization in providing for direct assistance in operating local soccer programs or those applying for affiliation. Printed materials concerning the coaching, refereeing, playing, or administration of the sport are not limited to members and are available on request to anyone. Opportunity to tryout for regional and national youth teams or to represent the United States in international competition is not limited to members of the organization, but is limited to citizens of the United States."
Check the box preceding 107(B)(1)(A)(vi).
In this part you are called upon to provide financial data for the previous operating period, or if you have recently incorporated insert your estimates for the next operating period. The answer to these questions in part 5 will have to be provided by your treasurer. Feel free to make any reference to "an attached budget" for any detailed schedules.
Check the block yes.
No. 7 "Is the organization formed to promote amateur sports competition?"
Schedule G should then be completed by putting an X in the box for yes and "See attached sheet for answers to these questions.". The answer to question 2 should be "see attachment". The answer to question 3 should be no. In your attachment to Schedule G you should state language similar to the following: "The organization does not directly provide facilities or equipment for the use of amateur athletes engaged in national or international sports competition, but it does provide the organizational framework for putting together teams, arranging for space to train and compete, and arranging for third parties to contribute money or material or supplies for such activities. The organization oversees applications by teams within its state [area] to travel to other states and to foreign countries to play in competition, and it reviews and approves the applications to host teams from other states and other countries to play within its own state [area]. The organization participates in the programs of the
United States Youth Soccer Association, Inc. The organization participates in the selection process for players to be trained and reviewed by the national youth coaches. The organization provides direct instruction and written materials for the training of youth coaches and referees and for the development of the sport for all ages of children interested in the sport of soccer, both boys and girls.
It is not necessary to complete part 7 since your application is not for a definitive ruling. If your attorney or someone other than an officer of the corporation is going to represent you in dealing with the IRS or is named as the person to contact on the first page of the application, you will need to complete a Form 2848 Power of Attorney. If your representative is not a lawyer, you will need to insert the number indicating the type of individual or relationship the individual has to your organization. It is highly recommended that you obtain the services of a local counsel or a local accountant to review your application and act for you in its dealings with the Internal Revenue Service.