AboutHarvey Mechanic Expertise Federal tax issues of nonprofit 501(c)(3) public charities only. Establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer question about Nonprofit's Unrelated Business or how to fill out forms. This forum is only for legal questions about a specific nonprofit asked by members or those otherwise directly effected by the specific nonprofit organization.
Experience I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar.
Expert: Harvey Mechanic Date: 7/17/2008 Subject: Return of Fees to a 501(c)3 gymnastics Booster Club
Question My daughter was part of a local gymnastics team that created a 501(c)(3) booster club for the team members. A monthly fee was assessed beyond the standard for-profit gym tuition to be allocated for meet fees, uniforms, coaching expenses, parties, etc. We have recently left this gym after paying an initial installment. The schedule for next season has not been released and no fees have been paid out for events or uniforms as of yet. The gym owner feels the fees are non-refundable due to IRS law. From your postings, it appears donations are not refundable but what about assessment or team fees? These fees are paid by the parent directly to the booster club for events and coaching fees that occur in the future and have not left the bank account of the booster club. Any advice or direction on how the law determines if these fees are refundable or not is greatly appreciated. Thanks very much.
Answer Donations are refundable. I don't know what of my postings gave you the appearance that they are not refundable. Fees are also refundable. By the way, it appears that the 501(c)(3) organization booster organization requires families to join the booster organization and if they don't then the booster organization will not share donations to the club with the child. That is not lawful.
The 501(c)(3) organization that is a booster organization 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 organizations that I have given to many questions about booster organizations, so I will give you that here:
The main principle of funding by a IRS 501(c)(3) nonprofit booster organizations is that the organizations 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 organizations, or the family's fund-raising or time put into booster organization 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 organization in fundraisers (sales) must go into the general fund of the booster organization and not directly into individual accounts of the booster fundraiser.
If the 501(c)(3) booster organizations 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.
