Starting a 501c3

Hey everyone,

Our team has decided we want to start a 501c3 because the school’s current PO system has been a huge issue to deal with. Due to the structure of the school’s system, we never really knew how much money we had at one time, and making frequent purchases in build season was difficult for everyone. We’ve talked to our mentors, and have agreed that starting a 501c3 is the best course of action. I was wondering if any teams that have 501c3’s have any advice on starting and maintaining it? How long did it take? What was the process like? What were some prerequisites? And most importantly, was it worth it?

Any advice is appreciated, thank you!

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There’s a lot of things tied to schools such as location and even insurance. Look into that before removing your self from the school.

First read up on all the IRS rules about them, and read the instructions for the application form.

When I was working on ours, I figured out that setting it up so that we could not give money to anyone, would be the easiest way to run it. When you give money to someone, you have to go through a process to insure you are not discriminating against anyone else, which gets kind of involved. Instead, we only give “stuff” to robotics teams, such as giving them robot parts, team uniforms, airplane tickets, motel rooms, and paying their registration entry fees.

We did all this about 12 years ago, not sure if things have changed since then, but it’s been working ok for us.

Our team still uses the school PO system to do a lot of stuff, though.

I wasn’t around on the team when we applied for nonprofit status, so I can’t answer a ton for what’s been helpful, but I know we have a few resources on our team website on 501c3 status if this is helpful at all!

https://www.team2655.org/resources/marketing/

You probably want to start a booster organization. To do that, you first have to decide whether you want to form a legal entity or operate as something a bit less formal. In NC, we have this thing called an “unincorporated nonprofit association,” which fit the bill for us. You need to have organizational documents that describe a charitable purpose and provide that, upon dissolution, the assets will go to a government entity or to another 501©(3). Then, you file form 1023ez online with the IRS and, a few weeks later, you get a determination letter.

You do have to file annual tax returns – for small nonprofits, it’s literally just a few questions online. (As a charity, you don’t typically pay taxes.)

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Come on over to George Mason U this weekend and talk. Our 501c3 is about a year old, so still fresh with thoughts. Starting soon could put you in shape to have it up and running by KO next year. It is important to know, define and document what you want the organization to be/do. Ours is in place to raise funds for the team. The team organization and operation is separate.
True value has been our part/supply order process. No more PO’s through the school, or waiting on reimbursement.
If you would like, I would share our groups documents so that you can review and rewrite to your need. Are you on the CHS Mentor FB page?

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We recently created a booster club through https://parentbooster.org/ and it has been working out well for us. They do all the filling of paperwork so all you have to do is file your taxes.

With the booster club are you able to get donations as a 501c3 but still maintain your connection to a school?

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If you have any specific questions, feel free to DM me. We started a 501c3 for 6844 in the summer of 2017. We couldn’t operate the way that we do without it; we aren’t affiliated with a specific school.

Our team started a 501c3 for exactly the same reasons you described. We had a really hard time getting funds from the school system quickly, it was nearly impossible to get reimbursed for purchases, and (as the only one connected to the school) I was the only one that could actually purchase items. It was painful.
We call our 501c3 a “Booster Club”. We filled out the appropriate federal paperwork. You have to files taxes and hold an official annual meeting once a year, but it’s really not too difficult. Compared to the alternative of ONLY using the school funds, this has been a HUGE help.

We still keep our school connections. I maintain a small amount of money in our club accounts. There are some things that we do through the school system (state education grants, team funds, small cash gifts for doing stadium cleanup or manning the concessions stand at sporting events…). Plus we get insurance and liability protection through the school. But our main source of cash flow goes through our 501c3 account that each of my senior mentors have access to.

When our team was created 4 years ago we did so without any outside support. Hence we created the team under what would become our non profit. Due to being a young team the non profit is run by students who manage Financials, outreach, season forms and what not. This has worked great for as this is the first year we partnered with the school. Since we are partners and only affiliated with the school we get whatever support they can offer and mostly operate on our own. However, there are many well established team who work as a non profit and are handled by mentors and adults with a board of directors. If you have any questions feel free to reach out!

Yes, the booster club is a 501c3. How it works is the booster club is basically doing all the fundraising. The team is still affiliated with the school and as others have said, we still keep some funds with the school but most of it is with our booster club.

3946 formed a booster club, starting right from rookie year. It’s incorporated, and jumped (continues to jump, afaik) through all the 501c3 hoops. As I understand it, it was set up along the structure of band and sports teams booster clubs. It is still affiliated with the school - for example, if the booster club should dissolve, any assets will transfer to the school. As I recall, it took only a couple of months to get incorporated, but a couple of years for the non-profit designation. Many of the sponsors’ donations and off-campus fund raisers go to the booster club, on-campus fundraisers and other donations go to the school board account, depending largely on the sponsors’ internal business rules. This gives the team flexibility for buying robot parts and such, but other items like travel, competition expenses, t-shirts, and such all flow through the school account.

Getting back to the insurance thing - in 2015, the team received a grand from Ingersoll Rand Foundation for purchase and outfitting of a trailer. The money went to the booster club, which handled the purchase, outfitting, and such, then donated the trailer to the school board, which maintains registration and (fleet-rate) insurance.

This setup, if you can make it work with your school/school board, really is the best of both worlds.

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This process has sped up considerably thanks to the IRS putting form 1023EZ online. It typically takes two weeks.

Note that the IRS’s turn-around time on the full form 1023 (which is substantially longer) is about 6 months, but can take upwards of a year. “A couple of years” probably means that somebody was trying to deal with the issue on the side in addition to their regular job.

The 501(c)(3) status is especially helpful for community teams who need to be able to show donors that their donations are tax deductible. (Donations to schools already are, so school-based teams already have this.)

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This is something that really benefits from expert advice and not internet opinion. The consequence of mistakes can be severe. Look for some pro-bono (free) advice from a lawyer or accountant that works in this field. Your local rotary club is a good place to start if you don’t have a team parent. Call it what you want (booster club, foundation) it is the 501-C IRS destination is what you need for tax deductible donations. Understand the rules for what is charitable and what is not. Avoid giving tax advice to your donors. The EZ version of the 501-C is only good for a certain income level. If you run a mid size team’s travel expenses through it you can easily exceed that. Once it is up and running they are fairly easy to maintain.

Disclaimer: Free internet advice is often worth less than you pay for it. I am neither your tax advisor or planning to help with your tax penalty.

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The restriction is that you cannot be expecting to receive $50,000 or more per year in any of the following three years.

It’s also important to get good advice on things that the 501(c)(3) can, and can’t do, because there are a couple of ways that booster organizations sometimes run into trouble.

As a school-affiliated team, double-double check Fairfax County’s school policies on how the 501c3 can and cannot support the team. A couple of teams in the area have ran into issues in recent years. One team lost their build space in the school for the remainder of the build season as a result.

Oy. I just looked that up. And, I thought our school system was bureaucratic.

@Bookkeeper Regulation 8424 is what you would need to consult for Fairfax County Public Schools, linked below.

Aegis had a parent volunteer who I believe is a CPA who helped to set us up, following GeeTwo’s post for the most part.

(Please consult with your program manager or principal with questions - I am with FCPS but not in accounting)

Team 4926 is a Non school affiliated non profit 501c3 team. We Havve been operating this way for 7 years now. Drop us a line and we can discuss this in more detail if you want.