The USTA Guide for Community Tennis Associations

(A publication of USTA about 1/2002)

 INCORPORATION AS A NONPROFIT ASSOCIATION  Pages 17, 18 and  19

The following is taken mostly from above publication but with minor additions and editing.

 Sooner or later your initial successes as a CTA will give rise to more ambitious goals. Perhaps your association sees the need to hire more experienced, and higher-priced tennis instructors. Or perhaps it appears that the only way to get the public courts resurfaced is by raising the necessary funds. Or perhaps your organization is in agreement that a local school's tennis program needs funds for additional equipment and instructional material. If these goals sound familiar, and you are not currently incorporated as a nonprofit organization, then this chapter is for you.

An organization does not have to incorporate in order to establish itself as a town-wide association with a constitution and bylaws. Although some legal and technical work is required for incorporation, the benefits are considerable and may be worth the effort. The following are some of the advantages of incorporation as a 501 (c) (3) organization :  (See page 18 of  Booklet)

1. Fundraising,  2. Obtaining Grants from companies and individuals, 3. Use of public courts

 

There are three main steps to this process :

Incorporation as a non-profit organization in the State.  2. Obtaining an Employer Identification Number (EIN). 3. Getting classified as a 501 C (3 ) organization by the IRS.
These steps must be taken in this order and the 3rd step cannot be taken without first taking the first two steps. Of the three steps the first two are by far the easiest and many CTAs go no further than step 2.

 

 Incorporation is regulated by the individual states.

 Most states have corporation codes which list requirements, including the filing of Articles of Incorporation. Articles differ from Byelaws in that they describe general goals, purposes, and powers of the corporation, while bylaws are more concerned with the structure and operation of the organization.

 Articles of Incorporation include:

1. Name - the name cannot be the same as, or similar to, another existing corporation.

2. Purpose - the purpose of the organization must be stated. It must conform to the

laws of the state, and if the organization plans to apply for tax exemption, it must

qualify as tax-exempt (see below).

The Articles of Incorporation, together with copies of the bylaws and the required fee, must be filed by mail with the proper state authority.

How to obtain an Employer Identification Number (EIN)

You do this using Federal IRS form SS-4.

 How to obtain Tax-exempt classification by the IRS.

Incorporation as nonprofit does not in itself confer tax exemption. To achieve tax-exempt status the corporation must convince the Internal Revenue Service that is has been organized to operate exclusively for one or more of the tax-exempt purposes defined in the IRS Code.

Exemption for a nonprofit tennis organization or foundation is possible under Section 501 (c)(3) of the Internal Revenue Code.

In making its determination, the IRS will rely heavily on the purposes of the corporation as stated in the Articles of Incorporation. The Articles must state explicitly that the operating purpose are beneficial to the public interest. Examples of purposes worthy of exemption are:

-combating community deterioration

-helping underprivileged youngsters

-reducing neighborhood tensions

-assisting with recreational responsibilities of local governments

-promoting amateur sports competition

Once designation as a 501 (c)(3) organization is granted, the IRS will provide a tax-exemption letter which states that the organization is both tax-exempt and eligible to receive tax deductible gifts. Annual tax returns will have to be filed using Form 990 or Form 990EZ and periodic audits by the IRS should be expected.

 How to Apply for Tax-exempt Status

An attorney or tax accountant should be consulted. If one is not available on a volunteer basis an organization can save time and professional fees by gathering all the required information before consulting an attorney.

Send for the Internal Revenue Service publication 557 "Tax-Exempt Status for Your Organization" and Form 1023 "Application for Recognition of Exemption." Both are available free of charge from the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402 or your local IRS office.

Cta501.htm

Rev 03/19/2002.