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You are here: Experts > Real Estate > Tax Planning: U.S. > Nonprofit Law > general question
Expert: Harvey Mechanic
Date: 5/12/2008
Subject: general question
Question
We have not filed for our 501(3)c) status with the IRS. WE are non-profit organized by our state of Arizona. Can we charge a fee to our members for our service? Can we also then give only to those who opt to benefit from our efforts? For example, we have some very wealthy parents who chose to not participate according to our bylaws. Do we legally have to offset those individuals who chose to not be a member of our club>? I know this sounds confusing, but we have a new board and we are trying to sort out the mess from our previous board. Also, one more question, Can we pay money to the Gym itself to cover expenses for our members?
Answer
It appears that yours is a booster club. It also appears that you did not yet read my basic information about booster clubs for youth. If I am not correct, please advise me. Otherwise, please review the information below and then get back to me if you still have any questions.
The 501(c)(3) organization that is a booster club is not for the parents or youth to fund-raise and have their efforts benefit individuals excluding other individuals in the sport who do not participate in the booster club as much. That would simply be a way to get tax deductions for payments that would, otherwise, not be deductible as when there is no booster club and parents simply pay a gym directly. For example, parents who pay tuition to the university for their child do not get a tax deductible donation for those payments. Parents need to be only thinking about the benefits for all of the youth who are similarly engaged in the sporting or cultural activity that the booster club is properly set up to support. I have been told that one of the main purposes of youth sporting activities is to teach youth fair play. We would expect, therefore, that parents would want to be fair and act in booster clubs according to IRS regulations.
I am not sure whether you have read my standard basic information for booster clubs that I have given to many questions about booster clubs, so I will give you that here:
The main principle of funding by a IRS 501(c)(3) nonprofit booster club is that the booster club may not discriminate in making grants to youth or college students on the basis of their family's membership in, or funding to, the booster club, or the family's fund-raising or time put into booster club activities. A good discussion of that instruction is found at:
http://jkn.com/View?j=842129.169787694498
All funds solicited on behalf of the booster club in fundraisers (sales) must go into the general fund of the booster club and not directly into individual accounts of the booster club fundraiser.
If the 501(c)(3) booster club has "individual accounts" make sure that the people know that funds that are earmarked by relatives or friends who are giving their own funds to the 501(c)(3) organization and which are going into the family's individual account are not deductible donations. The funding from the parents and other family members or friends for the individual account are considered pass-through funding and not grants by the organization when given for the use of the particular family member. These would be treated like tuition payments by family members to a university for the use of the family member.
If you want more details, I suggest you read my summary of some booster club rules that you find at
http://viewer.zoho.com/embed.jsp?f=aDebbe
Harvey Mechanic
Attorney At Law
Harvey108@hotmail.com
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