Nonprofit Law/Booster Club

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Question
Our high school athletic booster club is wanting to start giving scholarships to high school athletes.  What do we need to do if any as far  as taxes or the IRS goes.  Do we have to set up a scholarship fund can we just pay it out of our general account? We plan on giving four $1000 scholarships.

Answer
You need advance approval from the IRS for your method of giving
scholarships if you want assurance that your procedure is not going
to be called illegal by the IRS.

For organizations granting scholarships,  Schedule H of the IRS
Exemption Application needs to be completed and evidence needed as
starting at the bottom of page 25 of Publication 557 at
http://www.irs.gov/pub/irs-pdf/p557.pdf
and you can see there the issues that the IRS is concerned with.

See the Application for Exemption
http://www.irs.gov/pub/irs-pdf/f1023.pdf on pdf page 28 for that
Schedule H

in the right column on the first page under "Form 1023 not
necessary" discusses what types of organizations do not need to
file and among those is "Any organization that has gross receipts
in each taxable year of normally not more than $5,000."

It may come out of your general funds, as long as your Articles of Incorporation or Bylaws do not  prohibit such.

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

Expertise

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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