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 We are a non-profit youth club, comprised of multiple sports and 5,000 family members. We have been approached to sale tickets to our local professional basketball games by the professional team, selling to our family members, for the children's benefit of attending a professional game and as a fundraiser for the club. Will this jeapordize our non-profit status or have any tax implications?
Answer See www.irs.gov/pub/irs-pdf/p598.pdf
IRS Publication 598 "Tax on Unrelated Business Income of Exempt
Organizations"
and there you will see that such activities are generally
taxable. On page 6 you will see exceptions such as for volunteer workforce, but, if the child of the fundraising family receives a ticket to a pro basketball game, then they are not considered volunteers.
The IRS has published "Nonprofit organizations that are granted
Federal tax exemption based on their mission-related purposes
are allowed by the IRS, within certain limits, to generate income
from unrelated business activities."
www.irs.gov/pub/irs-soi/97eounrl.pdf on pdf page 1
The organization could, if it has more unrelated activities than
the IRS's vague "certain limit", be jeopardizing its exemption
depending upon the facts and circumstances. Two of the main
factors is the gross income of the activity in relation to the
gross income of the organization's total income and staff time
spent on the activity.
One of the main problems is that families are selling, at least in part, so that their child may attend a professional game. 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.
Now if the group sells and all of the benefits go to the club that particular problem, evidenced in that Oregon case, is eliminated. I am assuming that the youth club is a 501(c)(3) organization.
Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com
