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Any Legal or Financial Non-Profit Experts Out There?

[Update: I've been overwhelmed by the response and the offers to help. Thank you all! We've got an attorney looking into possibilities for us, both current and in the future. Hopefully that will work out. Thank you all for your responses. --Dave]

Hey folks, I have a special request today. I need some help in detail work intrinsic to our ability to continue Blazersedge Night, the huge event we hold each year where we send multiple hundreds of underprivileged kids to see a Blazers game...bringing some normalcy and joy into their lives and creating the next generation of Blazers fans. If this doesn't get resolved, the event will be no more.

Here's the story.

For the first few years of the event the only way to donate tickets was to buy them directly from the Blazers or to send me a personal check which I would then translate into tickets. Donations were good then, but they became really great when we opened up our site's PayPal account. The convenience of donating by PayPal took our ticket count from 200-ish to the 700+ that we gave away this year.

For Blazersedge Night 2012 we had almost $5000 come into the PayPal account. The volume of donations must have tripped something at PayPal. In late February, just a week before our deadline to complete the purchase from the Blazers, they limited our account. That means we can't withdraw a dime. This did not affect ticket purchases. I put them on my own credit card. Everything you gave went to tickets, just as promised (thus 700+ kids sent). I've since paid off the balance on my card so I'm not carrying interest on that $5000, but I still cannot get the PayPal account freed up. That means I'm personally thousands of dollars in the hole right now as the money you gave sits on their ledger.

I have a hard time making sense of the legalese they've thrown my way, but the issue seems to be the account's status as not-for-profit. It's not for profit. Not a dime of what you give goes to me. It's all turned around into a giant ticket purchase. But we're not an "officially registered" non-profit entity so they're balking. I talked to a nice lady in their customer service department and she said this could probably be cleared up by sending a letter explaining the situation plus a copy of my checking account documentation. She was wrong. Before I did that they wanted to see a half-dozen things, half of which I couldn't understand. Now that I've sent the info they want to see a dozen things, most of which I don't understand. I am not making this up.

I, personally, have a couple of outs here. I could switch the account status to "for profit", but then I'd have to pay taxes on everything you donate. Figure out taxes on an extra $5000 per year and the cost will become prohibitive for me. If I had to go this route I'd just eat the tax payment this year, get my money out, and not use PayPal for B.E. Night anymore. But then future donations would fall to their pre-PayPal levels, making the project not worth doing. Either way--exorbitant taxes or loss of the donation option--that's the end of Blazersedge Night as we know it.

The only other way I can see is to become an actual registered non-profit entity for the purposes of these yearly donations. It would be great, but I have no idea if it's feasible nor do I even know where to begin. That's why I'm asking if anyone out there does know. If you are familiar with these procedures and are willing to do a little pro bono work to make the project viable, both I and a bunch of kids would thank you.

We're looking for official, expert help here if possible. Lay advice is nifty, but we need more than that at this point. If you can help, please write me at the e-mail address following:

--Dave (