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: 7/5/2008 Subject: booster club scholarships
Question I am the new treasurer of a 501(c)(3) organization that is an athletic booster club. Last spring the previous board awarded college scholarship money to some of the outgoing seniors. I have reviewed your website and I see that the organization should have filed Schedule H and gotten approval with the IRS before granting scholarship money. I believe it did not file Schedule H when it applied for 501(c)(3) status three years ago, but I am verifying that. If I find that it did not, would it then be a violation of the tax code to pay the scholarship money to the colleges that was awarded by the previous board? As far as I know, appropriate criteria was used when awarding the money. My other concern is that the purpose of the club is to support our youth athletic program, so I'm not sure that giving college scholarships to outgoing kids is within the appropriate scope of the organization.
Answer It is not a violation of IRS regulations if a 501(c)(3) organization awards scholarships years after receiving its exemption determination letter, even though Schedule H was not included years ago in the 1023 application. Many atheletic booster clubs do not use, however, legal means in which to make grants or scholarships, as sometimes they base their decision, in part, on the fundraising or work of the family for the booster organization. You may have read many of my responses to other questions relating to booster organizations. Therefore, I am assuming that you read the approximate one page basic information that I give relating to funding of youth activities by booster organizations. If you have not read my basic information that I send about booster organizations, let me know and I will send that to you.
You are correct that giving scholarships is outside of your purposes. Your exemption application may not have included such purposes and
projected expenditures.
Certainly if there is any change in the operations of any IRS
approved 501(c)(3) organization, whether because of an amending of
its bylaws or otherwise, the organization may want to write to the
IRS to have them decide if there is any change to the exemption
status.
Exempt organizations' determination letters state that if its mode
of operation changes it should notify the IRS of the change so that
the IRS can determine the effect on its exempt status. Your
organization certainly can inform the IRS that it wants to engage
in those new activities and see what reply comes. You can see that
standard notification in the sample determination letter at:
www.mcsb.us/Documents/IRS%20501c3%20Approval%200001.pdf
on page three under the heading "Notify Us On These Matters"
Harvey Mechanic
Attorney At Law
Harvey108@hotmail.com
