DO YOU HAVE THE EXPERTISE, TIME, AND MONEY TO GO IT ALONE?
You may decide that you want to form a new tax-exempt nonprofit organization for your club, but forming that organization might be quite a burden. It takes quite a bit of expertise, time and money to set up, perhaps a thousand dollars and more than a year.
Before you decide to seek tax-exempt status from the IRS for your own club, consider using Yellowstone Robotics instead. Yellowstone Robotics has gone through the arduous process of forming an organization to get a valid tax exemption from the IRS and complying with all the federal, state, county, and local regulations governing public-benefit nonprofits.
You may find that forming your own IRS-recognized nonprofit to be quite a burden. It takes quite a bit of expertise, time and money to set up.
FORMING YOUR OWN NONPROFIT
In Washington State, you’ll need to form a nonprofit corporation. You’ll need state and local business licenses, for a fee, renewed each year. In Redmond, for example, where Yellowstone Robotics is incorporated, the business license fee for the smallest nonprofit is $92 per year. You’ll also need to register your organization as a charity with the Secretary of State.
Your nonprofit corporation must follow IRS regulations for nonprofits.Its Articles of Incorporation must satisfy various IRS requirements. Your corporation must have and follow bylaws and a conflicts of interest policy that are acceptable to the IRS. Your organization must demonstrate to the IRS that its spending and behavior adhere to its mission. Your organization must also demonstrate that its support comes from the public at large, not just from parents of the participants. Your corporation must wait until at least one tax year of 8 months or more has passed before applying for tax-exempt status. IRS fees to apply for tax-exempt status range from $400 to $850.
The IRS may deny your application for tax-exempt status if your organization is made up of a group of parents who have joined together to work cooperatively to provide funds to pay for the participation of your children in robotics, if the expenses incurred by the children would otherwise have been paid by the parents. The IRS suggests that this type of organization may fail to be covered by section 501c3.
The IRS may deny your application for tax-exempt status if your organization confers a benefit on a participant in return for their fundraising activities, such as by crediting amounts raised toward that participant’s dues requirements or by crediting amounts raised against the cost of a trip. The organization is providing a private benefit to that participant, and the IRS suggests that the organization engaging in this behavior may fail to be covered by section 501c3.
As part of the Paperwork Reduction Act of 1995, the IRS estimates that filling in and completing the forms to apply for tax exemption takes approximately 100 hours, if you do it yourself. CPAs typically charge $5000 to $10000 to prepare a tax exemption application for a small nonprofit.
Yellowstone Robotics has already done all that work. If you choose to use Yellowstone Robotics as a fiscal sponsor, all you have to do is document that your funds are being spent on youth robotics, in accordance with Yellowstone Robotics’ mission.