The world of tax-exempt equestrian organizations is wide and varied, and these organizations obtain federal tax-exempt status in a variety of ways. The type of tax-exempt status obtained by an organization is important because it dictates many of the requirements and benefits that come with the tax exemption. This first post will give an overview of some of the various federal tax exemptions available to equine organizations. Subsequent posts will dive deeper into each of the tax-exemption categories, their requirements and benefits, and the types of equine organizations that often qualify for each tax exemption category.
The first and most well known category is the tax-exemption under Internal Revenue Code Section 501(c)(3). To qualify as a tax-exempt 501(c)(3) organization, the entity must be organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational purpose, or for the prevention of cruelty to children or animals. In addition, organizations that foster national or international amateur sports competition may obtain 501(c)(3) status, but only if no part of their activities involve the provision of athletic facilities or equipment. In an interesting twist, however, certain “qualified amateur sports organizations” may obtain federal tax exemption under IRS Code Section 501(j), even if they have facilities, equipment or are local/regional in nature, if they are organized and operated primarily to conduct national or international competition in sports or to support and develop amateur athletes for national or international competition in sports.
Equine-related organizations that are tax-exempt under Section 501(c)(3) abound. Examples include the United States Equestrian Federation, the United States Dressage Federation, the United States Hunter Jumper Association, the United States Eventing Association and the United States Pony Clubs Inc.* Additionally, organizations that provide equine therapy to enrich the lives of individuals with disability are often tax-exempt under Section 501(c)(3).
Another relevant category is the tax exemption provided under Internal Revenue Code Section 501(c)(5) for agricultural organizations. Many horse breed registries, such as the American Quarter Horse Association, the Jockey Club and the American Morgan Horse Association are 501(c)(5) organizations.*
Trade or business associations may obtain federal tax exemption under Internal Revenue Code Section 501(c)(6). Examples include the National Thoroughbred Racing Association and the Walking Horse Owners Assocation.*
Finally, clubs organized for pleasure, recreation, and other nonprofitable purposes may be treated as tax-exempt under Internal Revenue Code Section 501(c)(7). Local riding clubs are often incorporated as 501(c)(7) social clubs.
© Deborah Buyer Law PLLC 2018 These materials do not constitute legal advice or create an attorney-client relationship. The reader is advised to consult with an attorney to obtain legal advice.
*All references to a specific organization’s tax exemption are based on the organization’s most recent IRS Form 990, obtained from www.guidestar.org.
Effective October 23, 2017, New York became the 48thstate to enact an equine activity liability law. The new law was included in the New York State Safety in Agricultural Tourism Act. Unlike most other state’s equine activity liability laws, the New York law governs liability of operators of “agricultural tourism”, and “equine activities both outdoors and indoors but excluding equine therapy” are considered agricultural tourism for this purpose. See here for the text of the new law.
Under the new law, operators of equine activities are not liable for an injury to or death of a visitor if the following requirements are met:
The NYS Department of Agriculture and Markets guidance indicates that either the failure to disclose a foreseeable risk or the failure to take reasonable care to prevent foreseeable risks could result in the loss of statutory protection. Additionally, operators should assess risk through the eyes of a visitor who is unfamiliar with the farm’s operations.
Note that the operator may establish additional rules of conduct to help manage risks, which may be more specific or robust than what is required by the statute. If properly displayed or communicated, these rules may provide further protection from liability.
The law also imposes responsibilities on visitors to: