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Every year there are stories in the press about running events and questionable practices when it comes to charity partners and charitable donations. This is unfortunate for the sport, as there is a false perception by the general public that events must donate to charities.
At the core, the purpose of a race is to be just that - a race. A race is designed to empower all people to participate in the sport of running in pursuit of enjoyment, health, well-being and competition. Over time the sport of running has grown into an amazing fundraising and marketing network for charities. However, donating a portion of race registration fees to a local charity it is not required by tax laws. That noted, a permit may outline that a race host must be a nonprofit organization or that a portion of race proceeds must support a local charity in return for using a community’s public assets (roads).
To better understand managing charity relations, event organizers and runners must first understand that there are two different business structures an event may be organized under: nonprofit or for-profit.
The designation of a race as a nonprofit has nothing to do with the contributions made to local charities by the race. Learn more about the business organization for nonprofit events >>
Events organized by nonprofits are entitled to retain net profits, compensate staff, engage volunteers, and hire contractors, to ensure a safe and enjoyable event for all. However, all nonprofit events share a commonality: they have an independent, volunteer board of directors that does not profit personally from the event.
Runners should understand that events organized by a nonprofit entity can simply keep the proceeds of a race as net assets to help with next year’s race, to invest in their own running programs, or to provide scholarship or donations to other nonprofit organizations. However, if a nonprofit event outlines charity partners, it is reasonable to expect the event to be transparent about its giving practices.
Events without the official 501c3 designation are typically organized as for-profit LLCs or sole-proprietor entities. Learn more about the business organization of for-profit events >>
Individual seeking to put on a race and donate all of the proceeds to a charity are not a nonprofit organization. Giving money to charity does not make an event a nonprofit. These events usually are for-profit/sole-proprietor events, and their gross receipts may be subject to income tax regardless if they donate all net proceeds to charity.
Runners should understand that events organized by a for-profit entity can simply keep the proceeds of a race as income or as net assets to help with next year’s race. However, if the event management company outlines charity partners for a race, it is reasonable to expect the event to be transparent in its giving to charity partners.