I’m looking for guidance on setting up a chess oranization with 501c3, tax exempt status. I’m looking at the IRS information and information from the Attorney Generals office in my state but I was hoping that someone that has been thru this recently may be able to give me some pointers.
Thanks
Tom
I would really, really advise that you talk to a lawyer about this. The one thing I can tell you is that the regional IRS offices make their own determination as to who qualifies, and they are not bound by decisions or precedents from other regional offices.
It’s all going to depend on how you have your club set up, but I agree, talk to a lawyer.
Tom:
Why do you need a 501c3?
If a chess club does have any money at the end of the year, it could look large for the membership of the club, only nickle and dimes to the IRS. If you are looking as a chess organization, would have to become a large organization before needing a income tax lawyer. If you need a 501c3 or other titles needed for the IRS, would have to organize the chess organization with elected members, the minutes of the board meetings, with the other fees that go with any organization.
If you do not mind a chess organization with elected members, that has the rights to discharge you from the organization you are forming. With a board that could work, or board thats un-civil to each other. With the legal and civil fees, could cost more then any taxs you would have to pay.
It’s pretty simple why you want that status.
A tax deductable organization allows businesses or whoever to make tax deductable donations to your cause.
I was about to post the same thing. Businesses can support events in return for some advertising and expense that. However, someones rich, retired aunt wouldn’t have anything to gain by making a donation to support chess unless there’s a tax benefit. Case in point… About a year ago, a local player asked about sponsoring tournaments just so he could have more events to play in. He’s too busy to travel to events and there aren’t a whole lot of local events. He was happy to contribute a small amount to help cover event shortfalls but may have been very willing to to donate a couple of tax-deductible grand. Big difference between giving up a hundred buck for recreational purposes verses giving up a grand for recreational purposes & tax benefits.
If it was as simple as a USCF affiliate application, every little group would have one. With the time and engery spent on a elected board, time and engery spent to take care of the legal and civil duties, then all the cost of a lawyer and civil fees. Would have to think of only the donations would come in with this IRS title. People will make donations, with or without a way to take it off their taxes.
Finding the people only willing to make a donation because of the IRS granting a tax deductable donation, would that amount of donations make up for the free time and energy, and the legal and civil fees? There is no free lunch in life.
It doesn’t work that way. Ask your state organization.
I looked into filing 501(c)3 status for my state affiliate a couple of years back and found out a couple of interesting things:
Firstly, if your income is less than $5,000 a year then you do not have to file for 501(c)3 status, but you can still write someone a receipt to use for tax deduction purposes. Of course, you still have to be registered as a Non-Profit Corporation or such in your state, which means meeting state filing requirements, having minuted meetings, etc.
Secondly, as far as I remember, you wouldn’t file for 501(c)3 but another status (something like 501c5 status I think), which chess clubs etc. fall into.
Thirdly an idea - The USCF is registered as a Non-Profit Corporation and the IRS has something where the USCF could have smaller “entities” that it could serve as an umbrella corporation for. Not sure about all the legalities of such an issue, but why couldn’t we direct people to make contributions to the USCF and have them “filtered” down to the affiliate so that affiliates don’t have to bother with such items? I guess the USCF could take an “administration” fee or something.
BIG DISCLAIMER - I AM NOT A LEGAL EXPERT AND ADVISE YOU TO GET ALL THE RELEVANT DOCUMENTATION FROM THE IRS.
Regards,
Chris
I think some chess clubs have gotten 510c3 status as an educational organization. The USCF is 501c3
I also maintain Chris’ disclaimer
Further to my recent post, I found the following on page 49 of IRS Publication 557 (irs.gov/pub/irs-pdf/p557.pdf), which looks like chess clubs should find for exempt status under the 501(c)7 clause, Social and Recreation Clubs (Hobby Clubs).
For those who got filed under 501(c)3 I presume they went for something along the educational lines, which for organizations like the USCF and AF4C I’m sure was easy to prove, but not so easy for a chess club.
Regards,
Chris
Thunderchicken:
If I make a donation of my blood to the American Red Cross, im not looking to get a refund of my 27 units of blood I have given. People will make donations, with their free time, their blood, even their money without asking to take it off their taxes.
Blood, time and money are all different things.
Like I said, I’d like to hear a story how you got a $1000 check that wasn’t tax deductable.
If you can prove that, I’ll leave this forum forever.
The site I have the tournaments, (Ramblewoods) have been making the donations in the cost of the free food at the tournaments. With the Western Michigan Open I, with the cost of the food was around $400. They had food ready before the first round, with lunch with huge sandwiches with hot soup. With the soda and coffee ready. Did tell them to cut back on the food for the rest of the tournaments, only have soda, coffee, and finger food. With the Western Michigan Open’s from II to IV, have been around $200 - $250 with the food bill.
They have also made a donation to the room. If I had to rent out the room, I think with a full day the room is $335. I’m 90% sure on that number, but it is over $300 for a full day with the tournament. There is going to be 12 events this year. When having the Western Michigan Open II, for some technical reasons they over booked the room. During the two weeks to take care of the problem, we had the event in the pool room. They did rent out the tables and chairs, the rental fee was around $180.
With having 12 Western Michigan Opens this year, if I had to make the payments for the renting of the room and the cost of the free food. Would have to say it would cost me over $6,000 just to cover the cost of the 12 events.
The Grand Rapids Area Chess Club also has its meeting at the tournament site on Mondays. They also have free food for the club members, its around $15 to $30. Its more of chips and soda pop, with some good stuff from time to time.
They also want a larger tournament down the road, some time in 2006. They have a gym 6700 square feet, its’ free for a larger tournament. They will let the director stay in one of the rooms for free. As they want a tournament with over 100 people, looking for a Senior TD to be the director.
The running jokes at my tournaments, "I come for the food’. You can come up thunderchicken, and you can eat as much food as you want. Its’ not a check for a $1,000, but its the free rental and food I could never pay out of my pocket.
As its a national chain, they are looking to expand with the same style of tournaments, and club meets like they have in Wyoming Michigan.
Thunderchicken, you can test the people that have come to the tournaments. Its’ not a check for a $1,000, but the cost to hold it would be a lot more then a $1,000.
Here’s at least one 501c3 chess club:
greenbaychess.org/
Dave, isn’t ISCA a 501c3?
edited* well at least at one time they were - they’re website hasn’t been updated lately. Maybe they’re not around any longer.
The USCF is NOT 501(c)(3), it is 501(c)(4)!!
That means it is not-for-profit but contributions are not tax-deductible.
The Chess Trust is 501(c)(3), but it is a separate legal entity, and is seeking even more independence from the USCF in terms of how its trustees are appointed.
Grant Perks was saying the other day that there have been some changes to 501(c)(4) status that may permit tax-deductibility of certain designated contributions, but I don’t know any details on that and I would certainly NOT rely upon that as legal or accounting advice.
Tom, if you’re looking for precedents that might apply in Nebraska, the Lincoln Chess Foundation was granted 501(c)(3) status back in the 1960’s, but only after B. Frank Watson literally camped out on the desk of a senior IRS official in DC. (Frank told me that he sat on the guy’s desk for about a half-day arguing his case.)
I’ve been told that the IRS is being VERY cautious about issuing 501(c)(3) determination letters these days and there are usually some filing fees involved, plus legal costs. One estimate I saw was that it might take $3000 or so to get a new 501(c)(3) started, and possibly six months to get a determination letter from the IRS.
You may want to ask the Illinois Chess Association (ilchess.org) how it obtained 501c3 status and how long ago it attained it.
Maybe I oughta set it up as a religious order… “Worldwide Church of Pawn Structure” or something like that. I could probably set it up over the internet in about a week for $20.
OK, I have to add a 
But it just might work!
For what it’s worth, most chess clubs (including the one I belong to) can qualify easily to be a 501C7 organization (“not-for-profit”) although donatons would not be tax-deductible.
We are starting a new (regular) club, so I was reading this thread with great interest, and wanted to check if I understood the following correctly:
Based on this, for a small club with an annual budget well under $1,000 is there any point in/need to go through this process. If an organization is not tax exempt, will it have to file a tax return? I am assuming the club would have need employer-ID in order to open a bank account, so it will be an entity known by the IRS. However, there has got to be some income limit below which you are not expected to file. (Some further research seems to indicate that this limit is around $5000 in gross income).
Thanks,
/Jens