AboutHarvey Mechanic Expertise US 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 questions about Nonprofit's unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation.
To search my previous answers you can do a Google search: site:allexperts.com/q/nonprofit [with your other search terms appended].
Experience I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar.
Education/Credentials B.S. Columbia University in New York City, 1970
J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude
Question I fear that the actions of the board members of my skating club may be jeopardizing our 510(c)3 status. Can you please tell me if any of the following can be called into question by the IRS or any other law:
1. The club operates out of a rink. Two of the board members are rink employees. One is the director of skating, and the other is the advertising manager.
2. Stipends are given out to the members who compete at certain competitions. In order to receive your stipend you are required to volunteer at least 8 hours during a competition hosted by the club. If you do not satisfy the volunteer requirement, you will not receive any portion of your stipend.
3. The board treated themselves with club funds to dinner at a 4 star restaurant that came complete with a limo ride.
Thank you.
Answer 1. See www.irs.gov/pub/irs-tege/eotopica93.pdf
starting on pages 11 "Private Facility Owners" which discusses
prohibited private benefit and excessive control of the booster
organization by such private facility owners.
2. Such activity is not considered volunteer activity and is considered compensation and if the organization does not follow normal employment law regulations, it may jeopardize its 501(c)(3) organization status. See http://viewer.zoho.com/docs/lcYOt or
which is a newspaper story describing a situation when the State
determined that organizations that promised "volunteers" gifts
over the value of $50 per quarter were subject to state wage
regulations for employees. That was an Oregon case but other
state laws are similar. That case was about a sports foundation's
"volunteers" being promised a season pass if they work roughly
two dozen days helping put on races at the ski area.
3. It appears that this is private inurement. An extensive discussion of by the IRS of the private benefit
issue relating to 501(c)(3) organizations is found at:
www.irs.gov/pub/irs-tege/eotopich01.pdf
(it takes a while to load the 19 page pdf file).
Especially note page 8 about a private school benefitting the
insiders.
Inurement (benefits to insiders) is discussed by the IRS at
www.irs.gov/pub/irs-tege/eotopicc90.pdf
specifically on the bottom of page 10
"even a minimal amount of inurement can result in
disqualification for exempt status, whereas private benefit must
be substantial in order to jeopardize exempt status."
Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com
