Nonprofit Law/Volunteers

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Question
I work for a dance studio that is a 501c3 charitable organization. We put on two annual dance shows in which we seek parent volunteers.  We ask that they volunteer during a show or pay a $25 waiver.  In addition, we ask them to sell a minimum of $20 advertising in the show program.  If they do not sell the advertising, we charge them a $20 fee.  Are these requirements and fees legal?

In addition, are we able to accept donations that the donor says must specifically benefit a certain dancer/student?

Answer
Any work that is in lieu of payments is taxable as employment taxes. There is no exception applicable to your situation. As the IRS writes at:
http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf on page 74
(it generally takes a while to load as it is a 91 page pdf file):
--start of excerpt  ---
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.
---End of Excerpt---


In June of 2011 the  IRS wrote:
---Start of Excerpt--
If a booster club confers a benefit on a participant in return for
their fundraising activities, such as by crediting amounts raised
by a participant toward that participant's dues requirement, or by
crediting amounts raised against the cost of a trip, the booster
club is providing a private benefit to that participant.
Consequently, such practices could result in the organization
failing to be described in 501(c)(3).
---End of Excerpt---
www.irs.gov/pub/irs-tege/booster_club_field_directive_6-27.pdf

The IRS continued in the next paragraph,

"It is also possible that amounts credited to a participant's
account due to fundraising would constitute income from services,
and could result in employment taxes."

That applies to other organizations.  

As for the payments earmarked for a particular individual, those are not considered by the IRS as charitable donations and the organization could not, therefore, give acknowledgements of a donation.  As to charitable deductions, see IRS Publication 526 "Charitable
Donations"  which is available at:
http://www.irs.gov/pub/irs-pdf/p526.pdf
on page 6 where the IRS lists as not deductible "Contributions to
individuals who are needy or worthy. This includes contributions to
a qualified organization if you indicate that your contribution is
for a specific person."

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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