by Mike Bourland
American Football Coaches Foundation
Courtesy: AFCA
Release: 10/01/2004
The Vision of the American Football Coaches Association ("AFCA") is to provide education for American football coaches so that they can better serve the public, not only through the enhancement of their technical skills and coaching capabilities, but also through role modeling and character development for young men and young women. AFCA provides substantial benefits to its member coaches, at an extremely low cost, including the annual convention that all have the opportunity to attend and from which all can benefit. In order to provide these benefits, the AFCA must have available a large amount of capital.
The Vision of the American Football Coaches Foundation (the "Foundation") is to provide funds to support AFCA's education vision and activities. The Foundation was created to provide financial resources for AFCA through various fund development initiatives.
The AFCA is a tax-exempt trade organization; however, direct contributions to the AFCA do not qualify for an income or estate tax charitable deduction to the donor. The Foundation is a publicly supported, tax-exempt charity. Donations to the Foundation do qualify for an income and estate tax charitable deductions to the donor. In order to maintain this favorable tax status, the Foundation must meet certain guidelines in raising funds. A significant portion of these guidelines relate to the source of the Foundation's financial support. A publicly supported charity like the Foundation maintains its favorable tax status by receiving a large portion of its financial support from a lot of different donors. All coaches who benefit from AFCA should be supporters of the Foundation. Permissible sources of this public support can come not only from contributions from coaches but also from people within the sphere of influence of the coaches. Donations from these sources are subject to specific rules and restrictions.
Because the Foundation is a publicly supported charity and must receive a large portion of its support from a broad segment of the general public, the Foundation cannot rely solely on contributions from a few wealthy individuals, family foundations or corporations to maintain its favorable tax status. This rule was intended by the IRS to make sure that a publicly supported charity is responsive to a broad segment of the public, and is not controlled by a small group of wealthy individuals, foundations or corporations.
Small donations are as important as large donations because every dollar given by a small donor (including AFCA coaches), the Foundation can receive two more dollars from a wealthy donor or the donor's foundation, without endangering the Foundation's favorable publicly supported tax-exempt charity status. The Foundation needs your personal contribution and needs you to encourage those within your sphere of influence to give also.
The ability of the Foundation to tax efficiently accept donations from large individual donors is dependent upon whether the Foundation receives support from a broad number of small individual donors. The Foundation must receive one-third of its support from a broad cross-section of the general public in order to maintain its favorable tax status. A single donor's gift, including the gift of a donor's family foundation, in excess of 2% 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 are vital to the Foundation's success in maintaining its favorable publicly supported tax-exempt charity status.
Please continue to plan and conduct fundraising events in your community, such as banquets and golf tournaments. Proceeds from admissions, sales of merchandise, performance of services, or furnishing of facilities at an event are classified as "gross receipts" funds of the Foundation. Gross receipts funds should target a broad base of the community, as no single person can provide more than 1% of the Foundation's total support through gross receipts and have it count toward maintaining the Foundation's favorable tax status. Also, care should be taken so that no fundraising activity becomes an ongoing business, to avoid the Foundation having unrelated business taxable income (UBTI) from the activity, resulting in income taxation and possible loss of the Foundation's tax exempt status.
An efficient and cost effective way for coaches and those within the coach's sphere of influence to make gifts to the Foundation is with life insurance. A coach or someone within his sphere of influence can make a significant gift to the Foundation by naming the Foundation as the beneficiary or owner/beneficiary of a life insurance policy on the person's life. Here is how it works.
A person who believes in the Foundation Vision applies for and receives a life insurance policy on his life. When the application for the insurance is signed, the person names the Foundation as the beneficiary of the death benefit of the life insurance policy. During his life, the person (the insured under the life insurance policy) owns the policy and pays the premiums on the policy. No income tax deduction is allowed the insured for his payment of the life insurance premiums. Upon the insured's death, the death benefit of the life insurance policy is paid to the Foundation. The payment of the death benefit to the Foundation is estate tax free to the insured and income free to the Foundation.
As an alternative, the insured, upon applying for the life insurance policy, immediately transfers ownership of the life insurance policy to the Foundation. The Foundation names itself as beneficiary of the death benefit of the life insurance policy. The insured makes income tax deductible gifts annually to the Foundation to pay the premiums on the life insurance policy owned by the Foundation on his life. Upon the insured's death, the death benefit of the life insurance policy is paid to the Foundation. The payment of the death benefit to the Foundation is estate tax free to the insured and income tax free to the Foundation.
The Foundation's Vision is an ambitious undertaking. It is strategic to the future success of AFCA. The accomplishment of the Foundation's Vision will require contributions from many different sources. Other tax and financial planning techniques to support the Foundation will be discussed in future installments of this column.
