Fall: Incorporation/Tax Exemption

A well-run Little League will find that incorporation is a good idea when its board of directors discovers that being incorporated could protect them individually in lawsuits. (Operating Manual - Incorporation, Little League.)

Generally, if an incorporated league is sued, the corporation is sued, not the individuals. However, if individuals are personally liable, they may still be sued individually.

Investigating whether your league is incorporated is easy. The president merely needs to call his/her Secretary of State (Division of Incorporation) for information. The incorporation may have lapsed, and will need to be renewed. If not incorporated, the league can request an information packet from International Headquarters on how to accomplish this.

Obtaining exemption from state and/or local sales taxes is different in many states and municipalities. As an organization entitled to federal income tax exemption as a non-profit educational entity, a well-run Little League will apply for exemption in its state. As such, it does not have to pay sales tax when purchasing goods such as equipment, plumbing and electrical supplies and groceries for the concession stand. (Remember, items sold by a Local Little League may be subject to sales tax at the time of sale.)

Note: In some states there may be a corporate income tax. For more information on state tax laws, contact the Department of Revenue in your state.

Local leagues in the U.S. are also required by federal law to annually file a year-end statement with the Internal Revenue Service.  If the league raises and spends more than $25,000, but less than $1,000,000, Form 990-EZ with Schedule A is used.  If the league raises and spends more than $1,000,000, Form 990 with Schedule A must be used.  Leagues that normally have annual gross receipts of $25,000 or less and do not have to file Form 990 or 990-EZ, must file the e-Postcard Form (Form 990-N) to retain tax exempt status.

The forms must be filed by the 15th day of the fifth month following the end of the fiscal year. Since the fiscal year for most well-run Little Leagues ends on September 30, the form must be filed by February 15 each year.

For more information on federal taxes, contact the local office of the Internal Revenue Service.

A database of all of these Operations Tips can be found here: http://www.littleleague.org/leagueofficers/Tips_Successful_League/2009-2010.htm

Next article: Player Membership Drive and Registration Materials