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
- 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, https://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.