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Nonprofit Law/Can we have individual paper accounts and a general account as well?


I have a very detailed and crazy question.  I am the president of a booster club that is attached to a gymnastics gym.  We just received our 501(c)(3) status last December and the treasurer at that time set up the account.  It is ONE account, with individual accounts set up for each girl for fundraising purposes.  The money fundraised by that family for that girl is listed in that paper account but there is still only one bank account.  It's just a spreadsheet setup.  No money is handed to any girl or their family.  The money is used to pay meet fees, coaches expenses, leotards, warm ups, etc.  This treasurer resigned and took his girl to another gym, as well as the previous president and several other parents with their daughters.  I was elected president and another person was elected treasurer.  When she went through the books, she brought everything current and met with the owner of the gym that we are associated with.  The owner is now telling us that it is against the law to have the individual paper accounts.  That it has to be one general fund and that the reason is because of how the 501(c)(3) was filed and what it says in the bylaws.  I contacted the IRS and was told that as long as it is one account, we can split it however we want as long as it is accounted for and no money handed to any girl.  But the owner still insists that we are not following the law.  What do we do?  Should we contact a lawyer? a CPA?  Can you help us.  Are we following the law?  Can we do this?

My summary of IRS regulations relating to 501c3 booster organizations is at -- you may be interested to read that as it answers your question.  Specifically, you will see that, 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---

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."

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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