Getting tax exempt status for my skydiving club

[VTmotoMike08 0]

So, I operate a college skydiving club at Virginia Tech. We are non-profit in the sense that the club does not put money into anyone’s pocket, but we do have a bank account that we use for operating expenses. All money is put back into the club in the form of gear purchases, advertising, *cough* parties, gear maintenance, etc.

One source of revenue is the few dollars that we get every time we refer a student tandem jump to the dropzone. I want to setup a paypal account so that we can collect tandem deposits online by accepting credit cards. We are not a business, and the closest thing that paypal had to describe us was “non-profit organization”. But in order to fully setup the account, we need to provide proof of tax exempt status. Huh? To the best of my knowledge, the IRS does not know that we exist and I would kinda like to keep it that way.

Has anyone dealt with something like this before? Anyone have an idea what documentation they are looking for? It says they need “Evidence of tax exempt status or registration with any regulatory bodies”. It can be uploaded via the web or faxed in. No more information is available from paypal. I would ask paypal what they mean but I am afraid that if I open my mouth too much we could lose our non-profit status with them and then would have to pay much higher fees. Any suggestions?

Mods, feel free to move this if it is in the wrong forum.

Edit: Yes, I am awake of collegeskydiving.com. But I am already in the top 5 post whores there and I thought I would get better responses here.

[brucet7 0]

What the are looking for is a letter you receive from the IRS after being determined to be a non-profit organization. You receive that letter by applying for it with the IRS. It is not easy or quick to get, but you should have no trouble since you are part of an educational institution.

POPS #10623; SOS #1672

[VTmotoMike08 0]

Thanks! You don't happen to know the form number or designation do you?

[brucet7 0]

Go to www.irs.gov/charities/index.html. Read the info there and you should be able to find links to getting the forms. They are pages long and be ready to produce your accounting info.

I am not sure which catagory you would fall under, but 501(c)(7) might be the most likely. Social Clubs. You might also fall under the education catagory.

Just thinking, since you are part of VTU, you might talk to their business office. You might be covered and just need a letter copy from them to accomplish what you need. Worth a try! And a LOT less work!

POPS #10623; SOS #1672

[Jeff.Donohue 0]

501(c)(7) status might not be available if your tandem work is too significant of a portion of your revenue. See
http://www.irs.gov/charities/nonprofits/article/0,,id=96189,00.html

"A section 501(c)(7) organization may receive up to 35 percent of its gross receipts, including investment income, from sources outside of its membership without losing its tax-exempt status. No more than 15 percent of this amount may be derived from the use of the club's facilities or services by the general public or from other activities not furthering social or recreational purposes for members."

You can read more about it here:

http://www.irs.gov/pub/irs-pdf/p557.pdf

You'd be filing a Form 1024, most likely, and you'd need a separate EIN (Tax ID number) for the club, which you may or may not have. It will take quite a while (6 to 9 months, last time I checked) before you obtain the formal designation.

I second BruceT's recommendation that you talk to your University first...

[VTmotoMike08 0]

Damn, this whole thing looks like its gonna be a lot more trouble than I was anticipating. I might just change our status with paypal and pay the fees for a regular business. Thanks for all the responses so far.

[skittles_of_SDC 0]

If you are willing to pay a fee so you don't have to do the work, check out this place: http://www.legalzoom.com/non-profits/non-profit-corporation-overview.html
I know they are legit. Almost used them for something but never did so can't tell you much more about them.

[kallend 2,105]

If you are a recognized university club, run your accounts through the school rather than having your own separate bank account, and you won't have any problems at all. That's what we do, all financial stuff goes through the dean of student's office.

...

The only sure way to survive a canopy collision is not to have one.