Nonprofit Law/boosters club

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Question
This is a follow up to you answer to my last question.Your answer to my last question did help clear up my understanding of the purpose and intent of booster clubs. You asked what I mean by "owners requires". The owner of this gym has a substantial amount of influence and control of the boosters club. As an example she dictates how many coaches will accompany the  team to competitions and the salaries of these boosters must be paid by the boosters, what services will be provided by the boosters club at competitions at our gym, and yes a percentage of all booster fund drives must be paid to the gym. The owner is not a member of the board, but no decision is made without her approval.

For the last two years our gym has held the state meet for level 4 and 5 gymnast. To prepare for these events the owner assigns specific tasks required to put on this event to the boosters club. As and example they prepare and sell food, take money at the door from those coming to  the event, boosters set up the gym for the event, clean the gym, clean and keep restrooms during the event, act as assistants to the judges, clean the gym after the event, and anything else to prepare and put on the event. The problem is that the boosters club gets no monetary compensation for all this assigned labor. All profits go  to the gym owner. Is it appropriate for a boosters club to provide these services at no cost to the gym, and can  the gym owner require these services from  the boosters club. It seems to me that we are providing free labor to a for profit  business and getting nothing in return.  One last question, I was told by the officers of the boosters club that we could give a yearly monetary contribution of $2,500.00 to the owner of the gym, is this correct.

Answer
See http://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.

Your situation is even worse, as you wrote that the booster organization is working for the for-profit gym without compensation. Your 501(c)(3) organization status is in jeopardy.

Internal Revenue Code section 501(c)(3) which is available at:
http://pages.citebite.com/w8p5e1ayxjv
has, in part, that the 501(c)(3) organization must be "operated
exclusively for religious, charitable, scientific, testing for
public safety, literary, or educational purposes ..."

The gym is not in a charitable class and, therefore, any grants to the gym, such as the $2500 that you mentioned are prohibited. I don't know where those officers got that $2500 figure, but, if they send me the url, I will comment on it.  It may refer to regular, for-profit entities.

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about 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 possible 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. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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