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Nonprofit Law/Is there a fair fix?


QUESTION: Our booster club has operated for several years using individual accounts and using a tier system to allocate fundraising dollars.  i.e. If you raised more money, you received more funding.....thought 10% always goes to the entire group.  Mid-season we have discovered this process may not abide by the 501(c)(3) rules.  Since it's mid-season, do we have to go back to the start of the season and reallocate money that's technically already been spent/billed/paid?  Or is there a way to document this error and press on?

ANSWER: It is certainly better if you can do the remedial work and readjust the money, but then the organization may find that it is sued by individuals who were working under a certain contract, who allege that the organization has breached.  My summary of IRS regulations relating to 501c3 booster organizations is at:
and you may be interested to read that.

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.    

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

QUESTION: I am one of the members who volunteered over 80+ hours of my time selling concessions at a concert venue.  The booster club has had a policy (in writing) for several years where 90% goes to the volunteering members and 10% goes to the whole group.  A small percentage of our team raised over $30k, so we're talking about a large sum with individuals having anywhere from $100s to as much $3000+.  As a member being told that the funds were illegally distributed and must be redistributed to a much larger group, we are looking for ways to not have to pay what we technically don't owe, but still be compliant at the end of the tax year.  The booster club does not know of any legal way to stay compliant without forcing payment from those that volunteered.  We also can not find anyone knowledgable enough to give us any answers that would resolve this issue fairly.  Any advice?

I believe that I am knowledgeable in the area of booster organization rules by the IRS as a large part of this forum has been for such questions and, after I started with the propagation of those rules, the IRS then reconfirmed its interest in the matter.

In August, 2013 the U.S. Tax Court supported the revocation of 501(c)(3) organization status of a formerly exempt organization and noted that a parent's fundraising was earmarked to reduce what
otherwise could be a $1,400 payment the parent would have to pay out of his/her pocket. The direct linkage of a parent's fundraising resulted with paying expenses for that parent's child and was a very specific benefit obtained by the insider.  While the parent may not have been paid cash, the parent nevertheless ended up escaping having to write a check for the amount of the benefit. Families who did not fundraise did not receive any benefits from the purported a 501(c)(3) organization.

I appreciate you want the organization to not get into trouble but also have the individuals receive what they were promised, but there is no way that both can get what they want.

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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