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Nonprofit Law/Is it legal for a parent to obtain a business sponsor to pay for his son's participation costs to be on the team?

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Question
A coach of a baseball team under the umbrella of a registered non-profit youth sports organisation has said that if anyone does not want to pay $250 participation costs (uniform, insurance, field maintenance) they may go aquire sponsors to avoid paying the $250.  Anyone who does not want to obtain sponsors must then pay $250.  

I thought a volunteer could not personally benifit from fundraising for a non-profit organisation.  I thought everyone had to pay the same participation cost.

1)Can a non-profit allow individuals to fundraise the basic participation cost claiming it is for the team when it is really to avoid handing the coach a check?  Is this illegal?  

2) Can the team, as a whole, go out and collect sponsors first, then add up the total raised, and then equally charge each member the balance of any shortfalls to pay the participation costs?

Answer
1. The IRS explains  at:
www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf on page 72-73
(takes a while to load as it is a 91 page pdf file):
--start of excerpt  ---

The use of the term "volunteer" generally has no significance in
applying the tax law....

A volunteer is an employee if an entity has the right to direct and
control the volunteer's performance, not only as to the results to
be accomplished, but also as to the methods by which the results
are accomplished.  It is the "right" to control, even if the entity
does not exercise the right, that is important. Many factors in an
employment relationship have to be considered before a decision can
be made as to whether the entity has the right to direct and
control.

If an entity does not retain the right to direct and control the
details and means of performing the work, the volunteer worker is
not an employee [would be an independent contractor].
--end of excerpt  ---

In any case, if someone obtains a sponsor that is fine, but then the sponsor will not get a tax deduction.  As to charitable deductions, see IRS Publication 526 "Charitable
Donations"  which is available at:
http://www.irs.gov/pub/irs-pdf/p526.pdf
on page 6 where the IRS lists as not deductible "Contributions to
individuals who are needy or worthy. This includes contributions to
a qualified organization if you indicate that your contribution is
for a specific person."

Also, it would be material misrepresentation to inform the potential sponsors that the sponsorship is for the team, when it is actually for the benefit of the individual to have the individual save the $250.

2. Yes.

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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