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Nonprofit Law/Nonnprofit Financial Aid and Service Hours

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Question
I am currently assisting a 501 (c) 3 non-profit soccer club with modifications to their accounting practices to come into compliance with IRS Regulations.  The club currently offers financial aid (fee discounts) to players of needy families.  The club requires the parents of all financial aid players to volunteer for 40 hours with the club.  This is for all full and partial financial aid (fee discounts).  Should the club base the value of the discounts on the total fee discount or on an arbitrarily determined dollar value per hour volunteered?  I also believe that due to the fact they are required to volunteer, they should then be issued a 1099 for the amount of the Fee discount if the amount exceeds $600, is that correct?  In previous questions you have answered, I saw that if the organization retains control of the job to be performed and how it is to be performed, then this should be a w-2 situation and not a 1099, is that correct?

Answer
"[T]here is no expectation of payment by a volunteer."
http://www.dir.ca.gov/dlse/opinions/1988-10-27.pdf on page 2
which is an opinion from the Chief Counsel of the State of
California's Division of Labor Standards Enforcement.

"True volunteer firefighters do not receive, or have an
expectation of receiving, compensation."
page 9 of
http://www.irs.gov/pub/irs-tege/win03_fslg_ng.pdf

As your organization requires work in exchange for benefit to the family, the work would be treated a taxable like the work that a university requires in exchange for financial aid.

A scholarship or fellowship is tax free to the recipient only if he
or she is:
A candidate for a degree at an eligible educational institution;
and
Uses the scholarship or fellowship to pay qualified education
expenses.
Qualified education expenses include tuition and fees; and course-
related expenses such as books, supplies, and equipment. Room and
board, travel, research, clerical help, and non-required equipment
are not qualified education expenses.
www.irs.gov/taxtopics/tc421.html

The value for what is given in return for 40 hours of work is the discount in fees and my dicussion earlier about the W-2s or 1099s would apply in your situation.

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

Nonprofit Law

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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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