# 01. IRS Form 1023 Narrative & Regulatory Compliance ## Chew On This Basketball non profit Corporation **Entity ID:** California Secretary of State #B20260111648 **Filed Purpose Statement:** *"The specific purpose of this corporation is to provide young youth basketball skills. Also teach exercise programs morals and manners. This corporation is organized and operated exclusively for the purposes set forth within the meaning of Internal Revenue Code section 501(c)(3)."* **Filing Channel:** Pay.gov Form 1023 Application for Recognition of Exemption **Legal Consultation Support:** LegalZoom Non-Profit Division (Gina Bautista, Senior Strategist) --- ### Section 1: Official Narrative of Programmatic Activities (IRS Form 1023, Part IV) #### Activity 1: Free Elite Amateur Athletic Development & Youth Physical Fitness (50% of Time & Budget) * **Description:** Chew On This Basketball provides year-round, intensive basketball instruction, conditioning, and competitive athletic development to youth in San Mateo County, focusing on underserved and low-income student-athletes. The program operates at **zero cost** to participating families. Participants receive professional basketball skills instruction, agility training, strength conditioning, injury prevention education, and nutrition guidance. * **Funding Mechanism:** Supported by charitable donations, foundation grants, corporate matching funds, and programmatic facility hours provided at-cost by the facility operating entity. * **Target Audience:** K–12 student-athletes (ages 8–18) residing in San Mateo County and surrounding Peninsula communities. Selection is based on athletic commitment, academic participation, and demonstrated financial hardship. * **Geographic Scope:** Primary training takes place at the organization’s dedicated athletic facility in San Mateo County. Elite competitive rosters travel regionally within California and nationally to NCAA-certified showcases. #### Activity 2: Mandatory Academic Tutoring & College Readiness Study Hall (30% of Time & Budget) * **Description:** Fulfilling the educational mandate established in the corporation's Articles of Incorporation, the organization enforces a strict **"No Study, No Run"** policy. Before stepping onto the hardwood, every youth participant is required to attend a 90-minute structured academic study hall led by paid W-2 academic mentors and qualified tutors. The curriculum includes daily homework assistance, STEM tutoring, reading comprehension support, and high school academic tracking to ensure NCAA initial-eligibility standards (Division I/II core course GPA requirements) are met. * **Impact Metrics:** Participants maintain a minimum 2.75 GPA, track homework completion logs, and receive specialized SAT/ACT preparation and college application guidance. #### Activity 3: "Morals, Manners & Character Leadership" Curriculum (20% of Time & Budget) * **Description:** Directly operationalizing the foundational clause of the Articles of Incorporation (*"teach exercise programs morals and manners"*), this program conducts weekly values-based workshops integrated into team practices. Youth are mentored in sportsmanship, conflict resolution, verbal and written communication etiquette, emotional self-regulation, and community civic service. Each team must plan and execute at least two local community service initiatives per year (e.g., coastal cleanup, food bank volunteering, youth peer mentorship). --- ### Section 2: Segregation of Commercial Activities & UBIT Protection To protect the corporation’s 501(c)(3) tax-exempt status from being challenged under the **IRS Commerciality Doctrine**, and to insulate against unexpected **Unrelated Business Income Tax (UBIT — IRC § 512/513)** assessments: 1. **Dual-Entity Corporate Insulation:** * Commercial adult tech leagues, public morning pickleball drop-ins, and paid third-party commercial rentals are housed within **Peninsula Sports Management, LLC (Facility OpCo)**. * The 501(c)(3) foundation remains untainted by commercial revenues, receiving dedicated court time, academic classroom access, and direct charitable donations. 2. **Alternative Single-Entity UBIT Compliance (If Combined):** * If operated under a single corporate umbrella, all net income derived from adult corporate leagues and public pickleball will be formally reported as Unrelated Business Taxable Income on **IRS Form 990-T**. * Under IRC § 513(a), the organization will maintain detailed cost-allocation accounting, deducting facility depreciation, utilities, and operational expenses against commercial revenues. * Total commercial activity will strictly not exceed $35\%$ of total operational hours to guarantee that charitable youth education remains the **primary and substantial purpose** of the organization. --- ### Section 3: Executive Compensation & Rebuttable Presumption Policy (IRC § 4958) To ensure full compliance with the IRS **Private Inurement Prohibition** and protect directors from intermediate sanctions (excise taxes under IRC § 4958), the Board of Directors establishes executive compensation through the **Rebuttable Presumption Process (Treas. Reg. § 53.4958-6)**: ``` ┌────────────────────────────────────────────────────────────────────────────────────────┐ │ THREE-PRONG IRS REBUTTABLE PRESUMPTION PROTOCOL │ ├────────────────────────────────────────────────────────────────────────────────────────┤ │ 1. Independent Board Approval: Salaries are authorized in advance by the Board of │ │ Directors, with zero voting participation from interested parties or family members.│ │ │ │ 2. Local Market Comparability Data: Compensation is benchmarked against independent │ │ nonprofit salary surveys for executive leaders in San Mateo County / Bay Area │ │ organizations with operating budgets between $1.0M and $2.5M. │ │ │ │ 3. Contemporary Written Documentation: Meeting minutes explicitly record the terms, │ │ the comparability data relied upon, and the roll-call votes of all members present. │ └────────────────────────────────────────────────────────────────────────────────────────┘ ``` #### Executive Compensation Schedule & Market Justification (San Mateo County 2026): * **Executive Director ($\$150,000/year — Full-Time W-2 Exempt):** Responsible for securing $\$300\text{k}+$ in philanthropic capital, institutional grants, corporate sponsorships, and overseeing statutory compliance. Benchmarked at the 50th percentile of regional youth development foundations. * **Director of Operations ($\$120,000/year — Full-Time W-2 Exempt):** Manages physical facility maintenance, the master digital scheduling calendar, vendor contracts, and risk management systems. * **Athletic Director & Head Coach ($\$115,000/year — Full-Time W-2 Exempt):** Manages all basketball curricula, player recruitment, scholarship evaluations, and supervises all assistant coaches and athletic staff. --- ### Section 4: California Labor & Child Safety Mandates #### California AB 506 (Child Safety & Abuse Prevention) 1. **Mandatory Live Scan Fingerprinting:** Every employee and regular volunteer chaperone (spending 16+ hours/month or 32+ hours/year with youth) must submit fingerprints directly to the **California Department of Justice (DOJ) and FBI** via an official Live Scan agency. 2. **Designation of Chief Safety Officer:** The Athletic Director is legally designated as the Primary Safety Administrator, responsible for reviewing DOJ clearance notices and managing the internal compliance ledger. 3. **The "Rule of Two":** A mandatory, zero-tolerance policy requiring two background-checked adults to be present during all interactions with youth, including on-court sessions, tutoring labs, team travel vans, and hotel accommodations. 4. **Mandated Reporter Verification:** All personnel complete the official state-approved child abuse mandated reporter training (AB 1432 standard) within 30 days of hiring and annually thereafter. #### California Assembly Bill 5 (AB 5 / W-2 Employee Classification) * Under California’s strict "ABC Test," all coaches, trainers, tutors, and event staff perform duties central to the organization's core programmatic purpose. * **Zero 1099 Independent Contractors:** 100% of athletic trainers and tutors are placed on direct W-2 payroll, covered under California State Disability Insurance (SDI), Paid Family Leave (PFL), Unemployment Insurance (UI), and high-premium Youth Sports Workers' Compensation Insurance (WCIRB Class Code 9040/9102).