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Nonprofit Law/Distributions of Funds


I am the treasurer for a 501 (c) 3 that functions as a booster club for a high school band program.  In the past individual student accounts were set up to track payments for specific trips.  Some of the funds were contributed by the student and others were contributed through fund-raising.  However, students are now asking for money remaining in those accounts for reimburement of expenses such as shoes, uniforms, and items that will remain with the student, not the organization.  I am looking for a document that will explain how we can distribute funds that are donated or raised under the 501 (c) 3 organization without violating IRS rules and other stipulations we should be following.  Thank you.

My summary of IRS regulations relating to 501c3 booster organizations is at:
and you may be interested to read that. You will see there that it is not correct that you had individual student accounts that had, in part, funds raised by that particular student's family.  

As to your specific question, though, a 501(c)(3) organization may only use its assets for charitable, educational or religious purposes.

Inurement (benefits to insiders) is discussed by the IRS at
(It takes a while to load the 52 page pdf file)
and specifically note, on the bottom of page 10,
"even a minimal amount of inurement can result in disqualification
for exempt status, whereas private benefit must be substantial in
order to jeopardize exempt status."

 The granting of its funds for clothing to a member when that clothing owned by the student and used, at least in part, other than in the band would be a non-charitable purpose and, if the amounts are great enough, considered substantial.

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


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. 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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