by Mike Bourland
American Football Coaches Foundation
Courtesy: AFCA
Release: 11/01/2000
In previous columns of The Extra Point, you have been introduced to the American Football Coaches Foundation. Over the last few months, this column has explained the Foundation and told you why your help is so important. The Foundation, a "Special Team" of the American Football Coaches Association, was created to promote and support AFCA's educational vision and purpose. A fundamental element of the Foundation's game plan is to provide financial support to the AFCA, especially to replace revenue from two pre-season college football games that will expire in two years.
The Foundation seeks to accomplish this goal in a number of ways. Because the Foundation is a publicly supported, tax-exempt charity, donations to the Foundation qualify for an income tax charitable deduction to the donor. However, in order to maintain this favorable federal income tax status, the Foundation must structure its fund raising activities according to certain IRS rules. This column is not only intended to introduce you to the Foundation and explain why your help is so important, but also to advise you how to get involved to help the Foundation meet its goals. There are a series of IRS rules that regulate tax exempt public charities such as the Foundation. These rules are specific but not difficult. Once you understand these rules you will be able to effectively do your part to help the AFCA through the Foundation.
Previous articles have focused on contributions to the Foundation. As earlier stated, under IRS rules, for every dollar given by a large number of small donors, including AFCA member-coaches, the Foundation can receive two more dollars from a wealthy donor or donor foundation without endangering the Foundation's favorable publicly supported tax-exempt charity status. Therefore, you are encouraged not only to contribute personally (in addition to your annual membership fee to AFCA), but also to solicit others to contribute. The Foundation must receive donations from a broad range of donors in order to be able to accept larger donations from single contributors and their foundations. Consequently, small donations are as important as large donations. Remember donation checks should be made payable to the Foundation (because contributions made directly to the AFCA are not eligible for an income tax deduction to the donor).
Continuing to raise awareness of the vision of AFCA in your community and school is an important way to help the Foundation. You have a unique opportunity to influence a broad portion of the general public. Carrying public awareness one step further, you are encouraged to take part in active fundraising in your community and your school on behalf of the Foundation.
Last month's article focused on fund raising activities such as banquets and sports tournaments. These activities are very effective ways to raise funds for the Foundation. As with all fund raising methods, banquets and tournaments are subject to the IRS rules regarding sources of support to the Foundation. In order for the Foundation to maintain its favorable status as a publicly supported tax-exempt charity, the Foundation must receive at least one-third of its support from a large number of donors. A single donor's contribution in excess of two percent of the total contributions received by the Foundation will not qualify in satisfying the one-third public support test. That is why small donations from a large number of contributors is vital to the Foundation's success and future in maintaining its favorable publicly supported tax-exempt charity status.
Another fund raising activity in which you are encouraged to participate is the sale of sports memorabilia and merchandise. The most common example of this type of fund raising activity is a silent auction at a banquet or other community or school sponsored event. The auction would include the sale of sports memorabilia and similar sports related items. The proceeds from the sale of such sports related merchandise is classified by the IRS as "gross receipts" funds of the Foundation. Gross receipts funds are proceeds from admissions, sales of merchandise, performance of services, or furnishing of facilities at an event for the Foundation. Gross receipts funds are subject to a separate set of IRS rules in relation to the Foundation's publicly supported tax exempt charity status. Gross receipts funds received from a single donor are included in satisfying the Foundation's one third public support requirement, but only up to 1% of total support to the Foundation. That means that no single donor can provide more than 1% of total support through gross receipts funds that will count toward maintaining the Foundation's favorable publicly supported tax exempt charity status.
Additionally, gross receipts activities must be structured so as to not constitute an ongoing business. If the gross receipt activities are of such regularity to constitute a business, "unrelated business taxable income (UBTI)", will be generated by the Foundation, resulting in the payment of income tax and the possible loss of the Foundation's favorable public supported tax-exempt charity status. In order to avoid UBTI, fund raising activities that generate gross receipts funds must not be of such a regular ongoing basis that they compete with taxable entrepreneurial enterprises (i.e. the Foundation could not operate a 6 day a week sports merchandise shop without generating UBTI). If structured properly, however, the sale of merchandise and other gross receipts activities can be an effective way to raise funds for the Foundation.
An auction is another gross receipts activity. An auction is a hybrid between a gross receipts activity and a contribution activity. For example, assume that an autographed football is donated to the Foundation for auction. Assume further that the value of the football is $20, and assume that it sells at auction for $50. Twenty dollars of the proceeds for the sale of the autograph football is gross receipts funds to the Foundation. The remaining $30 collected is contribution funds to the Foundation (price paid by purchaser less value received). The purchaser of the item is permitted to take an income tax charitable deduction of $30, the amount that represents the contribution to the Foundation.
For the last three issues this column has discussed ways you can have an impact on the success of the Foundation. If you have not done so already, please make a contribution to the Foundation. Encourage your colleagues and community to do so as well.
