To qualify for 501(c)(3) tax exempt status, an amateur athletic organization must fall under one of three rationales endorsed by the IRS:

1. An organization is educational by either teaching sports to youth or being affiliated with an educational organization. Such organizations may also provide facilities and equipment.
2. An organization that “develops, promotes, and regulates a sport for youths” may be charitable as combating juvenile delinquency or lessening the burdens of government. These organizations may also provide facilities and equipment.
3. An organization is “organized and operated to foster national or international amateur sports competition and no part of its activities involve the provision of athletic facilities or equipment.”

The IRS recognizes an exception to the prohibition on providing facilities and equipment for “qualified amateur sports organizations.” A qualified amateur sports organization, in addition to fostering national or international amateur sports competitions, “conduct[s] national or international competition in sports or to support and develop amateur athletes for national or international competition in sports.” Internal Revenue Manual, 7.25.26.1 (emphasis added). A qualified amateur sports organization will typically “promulgate official rules and standards of play; charter and supervise teams; provide coaching, equipment, and facilities; organize inter-team competition; and promote and advertise a sport.” Internal Revenue Manual, 7.25.26.3. Furthermore, the IRS applies a fact-and-circumstances approach to determine whether a competition is local in scope, rather than national or international as required by the code. For example, conducting a regional tournament may not be sufficient without evidence that it is linked to a national or international competition.

An organization that is primarily social or recreational (e.g., social clubs, organizations of casual athletes, or organizations “whose primary purposes are the recreation of their members”) will not qualify for 501(c)(3) tax exempt status as an organization that fosters national or international amateur sports competitions. Exemption is determined by the primary purpose of the organization rather than the membership it serves. Thus, having a membership consisting mainly of not serious athletes does not necessarily bar the organization from 501(c)(3) status. The IRS provides a non-exhaustive list of seven factors of varying weight to determine whether the organization promotes the type of serious competition that Congress intended to grant tax exempt status:

1. Is the sport that the organization supports an event in the Olympic or Pan-American Games?
2. Are the athletes that the organization supports in the age group from which Olympic-quality athletes are usually chosen?
3. Are the athletes of a caliber that makes them serious contenders for the Olympic or Pan-American Games?
4. Do the athletes have to demonstrate a certain level of talent and achievement in order to receive support from the organization?
5. Does the organization provide intensive, daily training, as opposed to sponsoring weekend events that are open to and attract a broad range of competitors?
6. Is the organization devoted to improving the performance of a small group of outstanding athletes or does it emphasize the improvement in health of the general public?
7. Is the organization a member of the United States Olympic Committee?

More information is available in the Internal Revenue Manual, and the 1982 and 1987 IRS publications on Amateur Sports Organizations.