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Nonprofit Law/volunteer coaches and their kids playing for free

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Question
My question is about volunteer staff and allowing their kids to play for free( no dues).  We have a handful of volunteer coaches and we currently let their respective children play without paying dues.  Is this legal?  We are a 501(c)3 organization in VA.

Answer
"True volunteer firefighters do not receive, or have an
expectation of receiving, compensation."
page 9 of
www.irs.gov/pub/irs-tege/win03_fslg_ng.pdf

In any case 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  ---
http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf on page 74

That publication refers to Fringe benefits and most, like provision of services to family members, are taxable as employment income. On page 16 we see an exclusion "For services, no more than 20% of the price charged to the general public for the
service.  IRC 132(c)(1)(B)".  The rest is taxable.

A 501(c)(3) organization may pay workers with cash or fringe benefits, as long as the amount is no more than what is reasonable for the work.  www.irs.gov/pub/irs-tege/eotopici93.pdf on page 10.  But such value is employment income and needs to be reported.

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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