(Editors’ Note:  The following was written in 2012 by Bob VanderLinden, one of the founders of the Albany Pickleball Club in Oregon. In our discussions with him about other matters he remembered having written it and forwarded it along. The information still seems very current and relevant to us, but it should be understood that we (like Bob) are also “headquartered” in Oregon, and your mileage in your state, province, country will vary. This is also not a legal opinion; it’s simply Bob reporting on what he went through and found. That said, we think it’s terrific and appreciate his having forwarded it. We hope it’s useful to you.)

Non Profit Tax Exempt Club Start-up

We just started a pickleball club here in Albany, OR and it seemed that start-up information was not easy to find or understand.  So, thought I would share what I found out in case it helps someone else.  Many of you may already know much of this info.  I saw many pickleball clubs out there, but could not really find much helpful info on how to begin.  This probably pertains more to Oregon and each state probably handles non-profits in a different way.

What we basically wanted was to start a bank account for the club, meet fed and state requirements, non-profit and tax exempt and not incur  a bunch of additional costs and process to get started. In order to get a club bank account we needed an  Employer Identification Number (EIN) from the IRS.  In order to get that we needed to file and register with the Secretary of State Oregon Corporate Division (503-986-2200www.filinginoregon.com).  There is a $50 filing fee.  Once we had done that we could call or register online with the IRS to get our EIN.

First of all, being a nonprofit corporation is not the same as being tax exempt. The nonprofit corporation designation is a matter of OR state law, while being tax exempt is a matter of federal law (and specifically the IRS).  In addition, in OR if your club is going to have employees you must also get a Business Tax ID (BIN) number from the OR Department of Revenue (503-945-8091).  If you are a 501c3 Charity you also need to register with the OR Dep’t of Justice ( 971-673-1880).

Clubs vs charities – When I thought of non-profit I always thought basically of a 501c3 charity.  In order to get this designation you need to file an IRS Form 1024 and pay a minimum filing fee of $400.  There is also significantly more processes and requirements associated with 501c3’s.  Most recommendations are that you get a lawyer to help with the process, which is an additional cost.  Just starting out, we did not have the funds, nor the inclination to take on this process.

Luckily, for a small club like ours that does not want to be a 501c3 (due to cost and additional requirements – maybe later if we get large enough), there is the 501c7 option for Social and Recreation Clubs.   This specifically mentions sports clubs.  As a 501c7 you can still file the 1024, pay the $400 and get a determination letter from the IRS stating you are a non-profit and there are some potential benefits such as reduced mailing costs with the Post Office.  As a 501c7 this is optional and we chose not to incur  the additional cost.

Both the IRS and the OR Corporate Division has help lines you can call (above) and they were very helpful.

Oregon:

Registering online at www.filinginoregon.com was fairly easy.  You need to set up a profile  and have the names and address of the incorporators – we used only 1, but you can have several.  Someone (the incorporator filing, although they don’t care who pays) also has to provide the $50 filing fee up front.  We had met several times and established club bylaws and then elected a board.  We used the President as the sole  incorporator.  We included our type of organization in our bylaws:  “The Albany Pickleball Club shall be operated as a nonprofit, tax exempt Social and Recreation Club under Section 501(c)(7) of the Internal Revenue Code, but without a formal letter of designation. Under Oregon’s ORS65, it shall be identified as a Mutual Benefit Nonprofit Corporation with Members.”  A result of the online filing was also an Articles of Incorporation document that you can print out or obtain a copy of.  I had heard of the A of I, but was not sure of the difference between it and the bylaws.

IRS:

1) Print and fill out form # SS-4  1st  – www.irs.gov – so you have all the info you need
2) Call 800-829-4933  (M-F 7-7 local time)  You will have your EIN by the end of the call and should receive a follow-up confirmation by mail in 2 weeks.
3) Since we are filing as a 501(c)7 – He said we needed our Articles of Incorporation, sent in a previous email to all of you, but not sure when exactly we need it.  Maybe when we file.  Info:  Pub 557 Chptr 4.
4) We need to organize and operate in accordance with the code for a 501c7.  We do not need to file an application for non-profit with the IRS – it is optional, but costs min of $400.
3 publications:  557 Chptr 4, 1 & 2, 4221-NC  Compliance – files and records, 4630
5) Unless we meet the exception in Chptr 2 of 557 (I don’t think  we do) we need to file an annual form  – 990 N – This is a postcard with 3 basic questions. – This needs to be filed by the 15th day of the 5th month after our accounting period ends.  Our fiscal year ends Sept 30, 2013 – so have to be filed by Feb 14th, 2014.  If fail to file for 3 consecutive years, then lose tax exempt status and must file the official application with min $400 charge to re-instate.

5 Comments

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  • Ms. Confused Sep 17, 2016 at 10:22 am

    With pickleball clubs are POPPING up ALL over the country and with little guidance on what to do and how to do it properly I appreciate this article. However, we aren’t sure we can do the 501c7 OR the c3. I’ve spoken with a couple of clubs who are going so far as to do a 501(c)(3) which I’m not sure how they’re able to do that.

    The problem I’m seeing w/ the c7 though is that sticky little rule about revenue from non-members (no-traditional?) can only be 35% of the total ‘gross’ receipts (and 15% of that in general public use of services/facilities). Did I get that right?

    So, for example, if we have a tournament and need sponsors to help defray the cost of facility rental (tennis club), advertising of event, supplies, etc. for conducting the event, it takes us well over the 15% (and the 35% for that matter). Plus when non-members participate in the tournament, their fees would be included in that 35% I assume.

    What is a club to do then if they’re pretty sure they wouldn’t qualify (or don’t even want to qualify) for the c3 ? Can a club still be a c7 and IF goes over the percentage required, just pay tax on that? With that said though, wouldn’t you then subtract the expenses like with what you do in a ‘for profit’ business, which certainly make the taxable income lower. ? I’m sure I don’t totally know what I’m talking about! Just want to get it right the 1st time.

    • Us Dec 06, 2016 at 09:05 am

      Sorry about the delay getting back. Major site problems. Suggest you contact the Bend Pickleball Club and leave a message on the site. They are pretty knowledgeable about this issue. Our own knowledge about this is a bit limited, we’re afraid, and we don’t want to give you the wrong ideas.

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