What is "amateur" sports competition?

In 1976, Sec. 501(c)(3) was expanded to include organizations that foster national and international amateur sports competition. This makes gifts to these organizations, which include the out-of-pocket travel expenses of officers, committee members, etc., incurred to further the organization's exempt purpose, deductible. Since 1976, the pertinent part of the section has read as follows (new portion in italics): "Corporations ... organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), no part of the earnings of which inures to the benefit of any private shareholder or individual ...."

"Amateur sports competition" has not been precisely defined. The regulations have not been updated to reflect the 1976 amendments and there have been no published rulings or other official communications that consider the effect of the change in rules to let professionals compete in the Olympic Games.

The IRS has permitted de minimis professionalism from the beginning. Favorable rulings were issued when the vast majority--but not all--of an organization's activities were for amateurs. In one case, exempt status was achieved despite (1) having a segment of the membership that had no amateur requirement, (2) conducting tournaments for pros and (3) conducting an international "open" tournament, but where in fact very few of the members were professionals and very little prize money was involved. The committee reports on the 1976 amendments supported a de minimis exception. The Conference Report commented with approval that the "Senate amendment permits an organization the primary purpose of which is to foster national or international amateur sports competition to qualify as an organization described in section 501(c)(3) ...." (Emphasis added.) Thus, some professionalism is allowed; the question is how much.

In recent years, a new definitional problem has arisen. The purpose of the 1976 amendment was to improve the performance of the United States in the Olympics and the Pan American Games. The Senate debate is clear on that point. But by traditional standards, the Olympics and the Pan American Games are no longer "amateur." If "amateur" is defined by the Olympic standards of 1976, organizations with Sec. 501(c)(3) status because they foster Olympic competition could be at risk.

The English upper classes invented "amateurism" in the mid-nineteenth century to avoid rubbing shoulders with the lower orders on the playing field. In the early days, amateurism was so class-related that in some sports a competitor could be disqualified if he had ever worked with his hands (i.e., he had ever done manual labor, even as a craftsman). This was justified on the basis that only "gentlemen" could be trusted to play games by the rules.

When the modern Olympics were organized in 1896, the organizers rejected barring those who had worked with their hands, but adopted the rest of the English "amateur" eligibility standard. This included a lifetime taint if one had ever made money in sports--any sport. Thus, Jim Thorpe, the American track and field star of the 1912 Olympics, had to give back his medals when it came out that he had once taken money for playing summer baseball. Essentially, the same eligibility rules applied when Sec. 501(c)(3) was expanded in 1976.

The Olympics are still "amateur competition," but the definition has been changed to allow the likes of Michael Jordan and Steffi Graf to play. "Amateur competition" is now defined as competition in which the competitors receive no money. The only exception is that professional boxers still cannot compete in boxing. There is no Olympic prize money--at least not yet--though there are rumors that it is on the way.

There are no indications that the Service intends to revoke or deny Sec. 501(c)(3) status because the international sports organizations have relaxed or eliminated eligibility standards. And it is predictable that any move in that direction would be dead as soon as those affected contacted their congresspeople. However, the fact that IRS action is unlikely is a thin thread. The Service should put minds at ease by stating officially that the current Olympics (and other national and international competitions that do not give prize money) are "amateur competitions." If the Olympics give prize money in the future, a statutory change will be in order, assuming supporting the Olympic team is still a national priority worthy of a charitable deduction.