You are here:

Nonprofit Law/501c(3) Gymnastics Club

Advertisement


Question
We are a non profit Gymnastics Parent Association.  The way we run our group is simply put, at the beginning of the season we discuss with all members on gymnastics teams the responsibilities associated with being a member of the Parent Association. You can choose to be a part of the group or not. If you choose to be a member of the association you will be expected to be a part of the fundraising activities and volunteer time at the gymnastics meets the association will host throughout the year.  All monies raised go into a general fund and at the end of the year all profit is split evenly among all the members of the association.  This money is not given to the individual person, it is credited towards meet and coaches fees for the following season. This money is not used for tuition expenses as that is separate, tuition money goes to the actual gymnastics club.  My question is, is what we are doing legal for this type of non profit? It is an association people can choose to be a part of or not, and if you are a part of it you will get some benefit in terms of group splitting profits and putting money towards the meet expenses for the year.  As history shows the gymnastics booster clubs were designed to foster and promote national and international amateur gymnastics, to support the gymnastics competitive team.  From what I understand to help financially the many expenses with the sport.  If this money is divided equally among the group, for season meet expenses, is that ok to continue what we are doing? And is it ok to have non participating and participating members, and only participating members splitting the general fund. The option is for all members to join, but several want nothing to do with volunteering and understand they do not get any assistance towards their fees.

Answer
You wrote, "all profit is split evenly among all the members of the association".  Such an operation would be what the IRS calls a cooperative.  A
cooperative is not qualified as a 501(c)(3) organization.  A
501(c)(3) booster organization is to be a charitable, not a
cooperative, organization. A charitable organization, like the Red
Cross, does not require beneficiaries to work for the Red Cross in
order to receive benefits.

In denying exemption to a purported 501(c)(3) organization
in 1992 the IRS at http://goo.gl/e9Mkd
on page 6 stated "The reason you were created and your method of
operation indicate that you are made up of a group of parents who
have joined together to work cooperatively to provide funds to pay
for the participation of their children in athletic events. The
expenses incurred by these children would otherwise have been paid
by the parents.  All parents of competitive team members are
automatically members of your organization.  Accordingly, members
expect to receive a benefit in return for their membership.  You
pay no benefits to non-members."

Another, similar denial of exemption was issued by the IRS in
1990 and may be viewed at
http://goo.gl/3CVwT

My summary of IRS regulations relating to 501c3 booster organizations is at:
http://goo.gl/ehXcH
and you may be interested to read that.Such an operation would be what the IRS calls a cooperative.  A
cooperative is not qualified as a 501(c)(3) organization.  A
501(c)(3) booster organization is to be a charitable, not a
cooperative, organization. A charitable organization, like the Red
Cross, does not require beneficiaries to work for the Red Cross in
order to receive benefits.

In denying exemption to a purported 501(c)(3) organization
in 1992 the IRS at http://goo.gl/e9Mkd
on page 6 stated "The reason you were created and your method of
operation indicate that you are made up of a group of parents who
have joined together to work cooperatively to provide funds to pay
for the participation of their children in athletic events. The
expenses incurred by these children would otherwise have been paid
by the parents.  All parents of competitive team members are
automatically members of your organization.  Accordingly, members
expect to receive a benefit in return for their membership.  You
pay no benefits to non-members."

Another, similar denial of exemption was issued by the IRS in
1990 and may be viewed at
http://goo.gl/3CVwT

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.  

Nonprofit Law

All Answers


Answers by Expert:


Ask Experts

Volunteer


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.


©2016 About.com. All rights reserved.