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Nonprofit Law/Fundraising for individual accounts in a Non profit

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QUESTION: Our private non profit organization offers individual families the opportunity to work at local professional sports events under their Non Profit.  Based on amount of hours worked, the non profit transfers family earning in the players account and used to offset fees associated to the gym membership (cheer organization).   Are there any other ways to apply the funds?  Questions below:

1. What other expenses can these funds earned in account through fundraising be used for.

2.  Throughout the season, players are required to travel and seek overnight accommodations to attend competitions.  Can these funds be used to reimburse for expenses?

3.  Options for families who may have funds in excess of fees earned in account other than roll over to offset future year enrollment expenses.  

4.  Can unused funds earned through fundraising be gifted to another player's account and if so, would those funds then be reclassified or would they still be considered "fundraising" dollars.

ANSWER: I have in my profile that this free forum is only for general questions relating to IRS federal exemption issues of 501(c)(3) organizations. Has your organization received a determination letter from the IRS that the organization is exempt under section 501(c)(3) and does it continue to want to maintain that status? After you give me that information I will reply further.

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.    



---------- FOLLOW-UP ----------

QUESTION: In response to your question.  Yes we have received a determination letter fro the IRS that the organization is exempt under Section 501(c)(3) and will continue to maintain this status.

Answer
Such an operation would be what the IRS calls a cooperative.  A
cooperative is not qualified as a 501(c)(3) organization.  A
501(c)(3) booster organization is to be a charitable, not a
cooperative, organization. A charitable organization, like the Red
Cross, does not require beneficiaries to work for the Red Cross in
order to receive benefits.

In denying exemption to a purported 501(c)(3) organization
in 1992 the IRS at http://goo.gl/e9Mkd
on page 6 stated "The reason you were created and your method of
operation indicate that you are made up of a group of parents who
have joined together to work cooperatively to provide funds to pay
for the participation of their children in athletic events. The
expenses incurred by these children would otherwise have been paid
by the parents.  All parents of competitive team members are
automatically members of your organization.  Accordingly, members
expect to receive a benefit in return for their membership.  You
pay no benefits to non-members."

Another, similar denial of exemption was issued by the IRS in
1990 and may be viewed at
http://goo.gl/3CVwT

My summary of IRS regulations relating to 501c3 booster organizations is at:
http://goo.gl/ULw6f6 you may be interested to read that.

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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