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Nonprofit Law/Non profit sponsoring members for activities


I was recently asked to join a non profit board of directors for a Police Athletic Association.This is a 501C3. They collect dues from every member of the police department. Are we allowed to give money back to the members for their own use? As it is now members are allowed to request "sponsorship" for athletic or charitable events.This association is also making donations to community charities that appear to be outside of the reason it was created. I just want to protect the organization and ensure it is in compliance.

I don't understand why members of the police department are required to be members and pay dues to the 501(c)(3) organization, but, as to IRS regulations, the charity may refund the amount of dues (give money back), but then the dues would not be all deductible as donations.  As to charitable deductions, see IRS Publication 526 "Charitable Donations"  which is available at:

on page 6 middle column under the heading "Contributions
You  Cannot Deduct" is "3. The part of a contribution from which
you receive or expect to receive a benefit"
Also, on the first column of page 4:
--- Start of Excerpt ---
Membership fees or dues. You may be able
to deduct membership fees or dues you pay to a
qualified organization. However, you can deduct
only the amount that is more than the value of
the benefits you receive.
---End of Excerpt---

If more money than was given in dues is granted to the individuals then it would probably be a violation of IRS regulations for a 501(c)(3) organization, unless that particular individual had some special need.  Revenue Ruling 56-304 has:
--- Start of Excerpt ---
Organizations privately established and funded as charitable
foundations which are organized and actively operated to carry on
one or more of the purposes specified in section 501(c)(3) of the
Internal Revenue Code of 1954, and which otherwise meet the
requirements for exemption from Federal income tax are not
precluded from making distributions of their funds to individuals,
provided such distributions are made on a true charitable basis in
furtherance of the purposes for which they are organized.

However, organizations of this character which make such
distributions should maintain adequate records and case histories
to show the name and address of each recipient of aid; the amount
distributed to each; the purpose for which the aid was given; the
manner in which the recipient was selected and the relationship,
if any, between the recipient and (1) members, officers, or
trustees of the organization, (2) a grantor or substantial
contributor to the organization or a member of the family of
either, and (3) a corporation controlled by a grantor or
substantial contributor, in order that any or all distributions
made to individuals can be substantiated upon request by the
Internal Revenue Service.
---End of Excerpt---
(cited with approval in IRS instructions for Form 1023 Application
for Exemption on pdf page 23 middle column) at:

The use may be allowable, but I don't know what you mean by "sponsorship" for athletic or charitable events.  If the "sponsorship" means that the funds are going to another 501(c)(3) organization, then that is fine.

The IRS would have no objection that your association grants funds to community charities (which are also 501(c)(3) organizations). The IRS gives preferential status to grants from one public charity to another in their "public support" test. See starting
in the middle column on page 34  "Qualifying as Public Supported". You would need to read your Articles of Incorporation and Bylaws and resolutions to find out if there is some violation of the internal rules of the organization if it made such grants to the community charities.

Harvey Mechanic, Attorney at Law -

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


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 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 "" without the quotes and then add your search terms before hitting enter.


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.


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

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

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