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Nonprofit Law/Individual Accounts & Fundraising for 501c3

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Question
Hi,
I am a member of a booster club and am confused on that fine line for individual accounts.  We have individual accounts for the members and the pass through funds from parents are not tax-exempt.  Are there any procedures that dictate that the funds collected on behalf of the organization must be distributed equally or can they only be distributed to the participants of the fundraiser?  For example if 2 people participate in an event to raise funds and those funds are only distributed into their accounts and not the larger organization?  

Thank you!

Sarah

Answer
My summary of IRS regulations relating to 501c3 booster organizations is at http://goo.gl/RO1ez -- you may be interested to read that. The funds do not need to be distributed equally, for example, higher level athletes who need more money for extra events that they participate in or for people whose family is of lower income.  But, if only two people participate the funds must not just go to benefit their family. My conclusion is based upon the following letter in which the IRS indicates that it treats "small groups" like individuals in the exempt organization context. http://www.irs.gov/pub/irs-lafa/den0543r.pdf
on page 4:
---Start of Excerpt--
A charitable organization must be set up for the benefit of an
indefinite class of individuals, not for specific persons. A
corporation organized and operated for the benefit of specific
individuals is not charitable, even if the specific individuals in
question are in need of assistance. Citing to Rev. Rul. 57-449.
---End of Excerpt--

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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