Q&A: Adding another program under your homeschool group’s umbrella

Super Bowl LII is over. Did your team win? Perhaps your homeschool group is considering adding football team.

Tricia, a treasurer if a homeschool program in Texas asked questions here and here about adding a football program. The homeschool group has 501(c)(3) status with the IRS.

She had several questions about tax exempt status and financial oversight.

  1.  What steps with the IRS do we need to follow to bring them under our homeschool group’s tax exempt umbrella?
  2. What forms would we need to file?
  3. Would they share our tax ID number or would they need their own?  What are concerns should we consider in doing this?
  4. The benefits to our members are obvious, but we don’t want to overlook concerns if there are any.  They would handle their own bank account, but how much would we need to manage?

 

Tricia,

I read your 501(c)(3) tax exempt application given to the IRS and see that sports teams was part of your mission. That’s good, because you do not have to approach the IRS and ask for permission to add the football program; it was included in your original tax exempt application.

Here are my answers to your questions:

1. When you file your 990 or 990-EZ Annual Information Return with the IRS, you simply list the football program as one of your programs. If your gross revenues are under $50,000 per year, you’ll file the simple Form 990-N and no explanation is required.

2. There are no additional forms to file beyond the annual Form 990/990-EZ or 990-N. That’s because sports teams was part of your mission in your original tax exempt application.

3. Use your main group’s EIN (tax ID number). The football program is just another activity run by the main group, so you should expect the typical concerns such as: Are they following policies, being careful, keeping good financial records and practices, etc? My book Money Management in a Homeschool Organization can help in this area.

4. Your main organization should have oversight of the football program’s bank balances. This includes allowing you, as the main group’s treasurer, access to their bank account online and require they give you a monthly bank reconciliation report and monthly reports of the income and expenses.

This may be a lot of extra work for you as a volunteer treasurer, so you may need to hire a bookkeeper or recruit more help from volunteers.

Tricia asked her questions by email. I can do that  for your homeschool program, but it is very time consuming to read and reply to emails. I charge a reduced rate of $50/hour to read and reply to emails. Or perhaps a phone call would be better. Contact me to arrange a private phone consultation.

Carol Topp, CPA

 

Sponsoring a football program under your homeschool group

 
 Super Bowl LII is a few days away! Even though the Green Bay Packers will not be playing (I’m a Packer fan) football is on my mind! Perhaps your homeschool group is considering adding football team. Read on!
I wrote to you about starting a football league and wanting to have a “fiscal sponsorship.”  We postponed the sponsorship last year, but are now wanting to move forward with it.  This has given us new things to consider and I am really out of my league.
  • We are wanting the football program to have a separate bank account from the main checking account, but of course have all the books open and reports/statements submitted to us.  Kind of they way some Boy Scout Troops work with their charter. Will this be a problem?
  •  Will we be able to purchase equipment and supplies for the team using our 501c3 sales tax exemption?
  •  Will businesses be able to make donations specifically earmarked for the football program and then be able to receive a tax deductible letter from us, the main organization?
  • We are planning on purchasing insurance covering the players and cheerleaders. Would the main group need to be on that policy also?
  •  If the football program ever desired to become independent from the main group, would it be able to retain the assets i.e., playing equipment?
I am very overwhelmed at the responsibility involved as a volunteer treasurer. Other board members seem to think I’m overthinking all of this, and that it is no different than a boy scout group and it’s no big deal to get set up–just file some forms and use our tax id to open a bank account for the football program.  I don’t see it as that simple.
Thank you, Tricia
Trisha,
The football program does not have to be a separate legal identity. It can be one of the programs you operate as the main group. Here’s my  reply to your questions.
  • A separate bank account is fine. It will use the main group’s EIN and belong to the parent even though the football program leaders may be signers on the checks.
  • The football program can use the main group’s 501c3 tax status to purchase equipment (sales tax free).
  • Donors can make donations to the football program, but checks should be made out to the main group. You are then obligated to set aside these donations as “restricted funds” only to be used for the football program.
  • Your homeschool group needs to be the owner of the insurance policy because the football program has no separate legal status to buy insurance.
  • All assets belong to the main group, not the football program. If your homeschool group wishes to make a gift to the football program when they split off, it can or you can sell the assets to the football program at a reduced price. I recommend you put something in writing in your fiscal sponsorship agreement about who owns the assets, but leave it up to the board to decide when the time comes whether to sell or gift the equipment to the football program.

I agree with the board; you might be over-thinking this. While it’s good to do your due diligence, it should be pretty easy to add the football program to your homeschool group’s activities.

I do recommend you write up an fiscal sponsorship agreement. Here’s a website with a few examples. I also attached an example I found at Mr Colvin’s law firm website, http://www.adlercolvin.com/index.php You can simplify the language if you wish.

I hope this allows you to sleep better tonight! 🙂

Carol Topp, CPA

Followup: Tricia had additional questions concerning sharing the tax exempt status of her organization and the finances of this new program. Read more here.

Adding a football program to a homeschool organization

Super Bowl LII is a little over a week away! While my beloved Green Bay Packers will not be playing 🙁 football is on my mind! Perhaps your homeschool group would like to add a football or other sports program. Read on!
We are a homeschool organization with 501(c)(3) tax exempt status and have been approached by a new member to start a football program. He is interested in starting a football league for our members. He discovered we are a 501c3 organization and our status could help him.

 

I am a little hesitant in sharing our status with a program that is yet to be established.  However, we like the idea of our boys having the option to play football.  He wants to start practices NEXT week and wants to use our checking account for depositing the funds paid by parents.

 

On top of all the other responsibilities of budgeting the events we provide, I’m at a loss as where to begin in this new endeavor or if we should?  Would he need a board of directors?  By-laws of his own?  Would we umbrella this league?  I don’t know where to start or how to advise him.

 

I’m not sure I can take on more responsibilities, especially one this large.  Can you offer advice or point me in the right direction as how to proceed?  I am thinking perhaps he should be independent for a year to “prove himself” before we allow him under our 501c3 status?
Trisha

Tricia,

Wow, nothing like pressure to make a decision!

What the football coach is proposing is called a fiscal sponsorship, i.e. using your 501(c)(3) tax exempt status as an umbrella he can fit under. Usually the sub organization pays a fee 1%-10% of their revenue to the parent organization.

There are pros and cons to a fiscal sponsorship arrangement. It can be temporary, just a year or two until the football program is spun off to be independent.

I recommend a book called Fiscal Sponsorship: 6 Ways to Do It Right by Greg Colvin. http://fiscalsponsorship.com/ the book and the website will help a lot.

You definitely want the fiscal sponsorship agreement written up and signed by both parties so that everything is clear.

You could set up the football program as one of your activities. This increases the risk to your group (football is a risky venture because of potential injuries). Make sure your insurance allows a football program; it may not.

Or you can require his organization have a separate board, bylaws, insurance, etc.  Ask to see the list of board members, minutes of meetings, bylaws and most importantly the insurance policy.

Don’t be pressured into making a decision just because he wants to start the program now. Poor planning on his part does not constitute an emergency (or quick decision) on your part.

 

Tricia asked her questions by email. I can do that  for your homeschool program, but it is very time consuming to read and reply to emails. I charge a reduced rate of $50/hour to read and reply to emails. Or perhaps a phone call would be better. Contact me to arrange a private phone consultation.

 

Carol Topp, CPA

 

Follow up: Tricia’s homeschool organization postponed the sponsorship for a year and in the following year started a six-man football team and it was very successful.  They even added cheerleaders!

Read additional questions and answers Tricia had about operating a large program under her homeschool group’s tax exempt umbrella.