IRS lets FIFA tax-exempt foreign groups skip Form 990

Only days after the World Cup Final, the Internal Revenue Service released a revenue procedure Friday allowing tax-exempt foreign members of the Fédération Internationale de Football Association to avoid filing a Form 990 return if they competed in the FIFA World Cup.

Revenue Procedure 2026-28 relieves tax-exempt foreign participating member associations of FIFA that are competing in the 2026 FIFA World Cup from the requirement of having to file a Form 990-series annual information return or notice for tax years in which they have no gross income from sources within the United States or effectively connected with the conduct of a trade or business within the United States other than income related to participation in the 2026 FIFA World Cup.

The exception applies to any foreign PMA competing in the FIFA World Cup 2026 exempt from federal income tax under Section 501(a) (other than a private foundation or a Section 509(a)(3) supporting organization) for any taxable year in which the PMA has no gross income from sources within the United States or gross income effectively connected with the conduct of a trade or business within the U.S., other than income related to competing in the FIFA World Cup 2026 

"Such PMAs are not expected to have recurring income from United States sources or recurring income effectively connected with the conduct of a United States trade or business given the discrete time-limited nature of the FIFA World Cup 2026," said the revenue procedure. "The presence of such PMAs in the United States is a function of their membership in FIFA and participation in the FIFA World Cup 2026 (including incidental administrative and financial arrangements necessary or appropriate to facilitate their participation in the FIFA World Cup 2026), rather than independent activity in the United States; and requiring such PMAs to file Form 990 would impose a compliance burden disproportionate to the informational value provided by the filings because Form 990 requires organizations to report the entirety of their worldwide operations, whereas the revenue and activities of each foreign PMA are overwhelmingly expected to be foreign in nature in those taxable years in which the PMA is exempted from filing."

While FIFA itself and its foreign member associations may be exempted from taxes, FIFA member associations could still be facing taxes from the states where they played, according to some experts. "At the federal level, the teams have a federal exemption,"  Mina Capouet, a senior legal analyst at Wolters Kluwer, recently told Accounting Today. "FIFA has been classified as a tax-exempt organization in the U.S. since the 1994 World Cup games. However, the organization was not able to secure a similar exemption for its nations' members like the teams until now in the U.S. this year. Notably the Treasury made tax concessions allowing FIFA World Cup teams to apply for a 501(c)3 tax exempt status, so they're off the hook for federal tax, but state taxes are still at play." 

Individual athletes could also be facing state taxes. "Non-resident alien individuals, including players, are subject to U.S. federal income tax and reporting rules," said Mavanee Anderson, a senior content management specialist at Wolters Kluwer. "In other words, any income earned while they're in the U.S. could potentially be taxed. Compensation for services is generally sourced where the services are performed, including salaries, wages, personal services, business income. … It can include the U.S. allocable part of match fees, team or federation bonuses, prize-related payments, promotional [appearances], endorsement services, and other event-related or event-specific payments. That's potentially a lot of money." 

(Read more: World Cup players face tax penalties.)

The IRS is also in the process of revising the Form 990 to require tax-exempt organizations to disclose more information about their donors and fiscal sponsorship arrangements as part of an effort to uncover signs of potential fraud and hidden sources of funding. On Wednesday, the House Ways and Means Committee also advanced four bills aimed at tax-exempt organizations, one of which would require them to disclose foreign sources of funding and another about their fiscal sponsorship arrangements.

Matt Petroski, a tax partner in Armanino's nonprofit practice who specializes in Form 990 compliance, has been watching the proposed changes in the Form 990 closely.

"A lot of organizations are concerned that, depending on what their mission is, that they could be a target," he told Accounting Today in an interview in May. "The additional disclosure isn't in and of itself bad. The nonprofit industry agrees that transparency is a good thing, and I think transparency should give donors a good understanding of what the organization is doing, and that their money is being well spent, and they're doing good work. It's always that question of what is the purpose of the additional disclosure? Is it helpful? What is the burden versus the output? What are we getting from it?"

He noted that in 2008 there was an earlier redesign of the forms. "It drastically changed the 990 and there were some parts where there was this question of do I really need to do this?" said Petroski. "This is a lot of extra work." 

He  pointed out that Schedule F was added to the Form 990 in tax year 2008 for reporting on foreign activities, grants and investments. "That was a significant additional burden," he added, especially for smaller organizations with limited bandwidth.