Tax Exempt Sports

by | May 8, 2017 | Cracking the Tax Code with Christy | 0 comments

One day when you’re idly clicking from sports show to sports show, think about the organizations being promoted – football, baseball, basketball, tennis, swimming, cheerleading, dance . . . a seemingly endless list.  Now think about the fact that many of the organizations, despite earning hefty profits annually, are nonprofit – meaning they don’t pay taxes on their income.

So why don’t these organizations pay income taxes like the average Joe?

The short answer is that Uncle Sam doesn’t tax organizations designed to better the welfare of society.

Enter the nonprofit sports organization intended to promote awareness of physical fitness and education. Sports organizations often award thousands of dollars in college scholarships and private training; they fund summer camps for kids; they sponsor programs in our public school systems.  Many sports leagues require contracted players to volunteer time toward those community services.

And then there’s the required paperwork.  Maybe sports leagues should be awarded tax-free status based on the criteria of their reporting alone.  The leagues would probably show no noticeable profits after paying a tax professional to complete their returns anyway. For instance, the US Tennis Association’s Form 990 for 2015 was comprised of 101 pages.  That’s right.  101 pages.  For just the Association itself.  Not for its affiliates.  The return disclosed everything from the organization’s accomplishments to its compliance with tax laws, officer compensation, hours worked by executives, revenue sources, expenses, even its lobbying efforts. It was a numerically artistic marvel.

And think of the tax benefits.  Yes, there are some.  When big businesses give perks to clients and employees in the guise of pricey tickets to nonprofit sports events, the cost is 100% deductible, as long as a few caveats are observed.  And under certain conditions, you might be able to declare expenses for individually supporting the organization as well. Everybody’s a fan!

But remember that not every nonprofit-related contribution is deductible, and not all nonprofit sports organizations qualify for deductible contributions. The rules are complicated, so follow the advice of your tax professional.

If you’re not sure about whether your support of a nonprofit sports organization is an allowable expense, give us a call at Law Offices of Christy Lee, P.C.  We’ll be happy to consult with you concerning all your charitable contributions.