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What Sports Clubs need to know about Form 990 Filing?

An Overview of 501(c)(3) Tax-Exempt Status and IRS Form 990 Filing Requirements for Sports Clubs

- Updated September 23, 2022 - 12.00 PM Admin, ExpressTaxExempt

A sports club usually consists of a group of members who come together to form an association that involves one or more sporting activities.

This article explores the sports clubs’ general characteristics, criteria to apply for tax-exempt status, annual filing requirements, and more.

1. Activities of a Sports Club

  • A sports club usually consists of a group of members who come together to form an association to play sports.
  • The sports clubs can play more than just one sport.
  • The primary purpose of the sports club is the development of the sport, it can also conduct multiple sports activities. These clubs are classified as single sports clubs and multi-sport clubs.
  • They are also classified based on the members of this club playing within the club or with members or teams of another club.

2. Can a sports club be a nonprofit organization?

Yes! A sports club can function as a nonprofit organization by operating exclusively for the welfare and development of a sport rather than for profits.

They can also participate in national or international sporting events for the promotion of the game to be recognized as a nonprofit organization.

3. Obtaining Tax-Exempt Status for Sports Clubs

Like every other nonprofit organization, sports clubs can also apply for tax-exempt status under IRS section 501(c)(3).

Why should sports clubs get 501(c)(3) status?

There are many reasons why obtaining tax-exempt status can be beneficial for a sports club.

Mainly, when a sports club obtains 501(c)(3) status, they become exempt from federal taxes. The other benefits include:

  • Tax-free contributions: All the donations, contributions, and gifts received by the tax-exempt sports clubs are tax-deductible.
  • Public Legitimacy: An IRS-authorized tax-exempt sports club can have greater public recognition.

To learn more about 501(c)(3) status, click here.

What are the requirements for a sports club to get tax-exempt status?

They can obtain tax-exempt status from the IRS if they meet any of the following requirements.

  • Developing young people in a sport or affiliated with an exempt educational organization (Educational).
  • Combating juvenile delinquency or lessening the burdens of government (Charitable).
  • Fostering national or international amateur sports competitions.

Note: A sports club or a sports league can broadcast the sport on television and use it as their primary source of income and still qualify as a tax-exempt organization. This is because broadcasting sports is also considered a development of the game.

How to apply for 501(c)(3) tax-exempt status?

The sports club has to file Form 1023 with the IRS to be eligible for tax-exempt status. They will receive a determination letter from the IRS recognizing their tax-exempt status once approved.

Here are the steps to file Form 1023:

  • Register for an account on Pay.gov
  • Enter “1023” in the search box and select it.
  • Complete the form.

To learn more about Form 1023, Visit Here

Note: Any small non-profit sports club that has gross receipts less than $5,000 for each tax year can file Form 1023-EZ to get the 501(c)(3) tax-exempt status.

4. 990 Filing requirements for Tax-Exempt Sports Organizations

The application (Form 1023) filed by the sports club needs to be approved by the IRS under section 501(c)(3) to be considered a tax-exempt.

Once approved, tax-exempt sports clubs are required to file Form 990 series to report their annual information to the IRS.

Based on their gross receipts and assets, the sports clubs may file different versions of the 990 form.

  • Form 990-N - Sports clubs with gross receipts ≤ $50,000
  • Form 990-EZ - Sports clubs with gross receipts < $200,000 and total assets
    < $500,000
  • Form 990 - Sports clubs with gross receipts ≥ $200,000 or total assets
    ≥ $500,000

Additional Filing Requirements for Sports Clubs

Sports clubs are required to attach a Schedule A along with their Form 990 to describe their public charity status. They may have to attach a few other Schedules based on their financial status and operations.

Click here to learn more about 990 Schedules.

When is the deadline to file Form 990?

Generally, the due date for the sports club to file Form 990 is the 15th day of the 5th month after the tax period ends.

To learn more about the deadline for filing Form 990, visit here.

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