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 Little League Headquarters on how to accomplish this.
Little League Baseball, Incorporated, is exempt from federal income tax as an Internal Revenue Code Section 501 (c)(3) organization. This is important, since as such, contributions made to Little League are deductible by the contributor. Little League has obtained tax-exempt status for over 4,000 local leagues through a group exemption letter received from the Internal Revenue Service in 1981. Local Leagues have the option to seek their own tax exempt status by filing a separate application (Form 1023) with the IRS or by applying to be included under Little League Baseball’s federal group exemption number (Tax Exemption Legal Bulletin - PDF). To request verification of your league’s inclusion under our group exemption number, please submit a written request with your league ID #, league name, league’s federal Employer Identification Number (EIN) issued by the IRS and the league officer contact information that it should be sent to. The request can be mailed to Little League International, P.O. Box 3485, Williamsport PA 17701 or faxed to 570-322-2376.
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. Form 990EZ with Schedule A is used if the league raises and spends more than $50,000 but less than $200,000. If the league raises and spends more than $200,000, Form 990 with Schedule A must be used. Leagues that normally have gross receipts less than $50,000 and do not file a Form 990 or 990EZ must file the e-Postcard 990N. Failure to file for three consecutive years will result in revocation of 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 end 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/2010-2011.htm
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