Nonprofit Law/Fundraising Uses

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Question
I am president of a 501-c-3 Booster. We are taking a large trip to a National Competition in Florida this season. The membership has already decided that it would be both normal and acceptable to travel with all three of our coaches for three squads that total close to 60 girls. The question that has been posed to me is that if we pay coach travel are we in violation of IRS policy if the girls are paying for the majority of this trip themselves? ALL other funds raised this year with the exception of minor operating expenses will go to benefit the girls and we expect total fundraising to be in excess of $35,000 with the coaches expenses being no more than $3000.00. I appreciate any advice you can give us.

Answer
A 501(c)(3) organization may decide for the whole year only to fund the coaches and not give any benefits directly to the youth, so certainly it may decide to pay for coaches to travel to a national competition.

The IRS rule for what nonprofits may spend money on is similar to
the standard that the IRS uses when determining what is a valid
business expense for an ordinary business. For example, at:
http://www.irs.gov/pub/irs-tege/eotopich02.pdf the IRS refers
extensively to the regular business expense rules and applies them
to 501(c)(3) organizations. On page 32 we see "Reimbursements are
technically covered by Regs. 1.62-2.  However, for administrative
purposes, all TE/GE [Tax Exempt & Government Entities Division]
administrative personnel will treat reimbursements of a business
expense the same as if the expense were paid directly by the
employer, as long as the employee complies with the substantiation
rules..."
See also:
http://www.irs.gov/pub/irs-pdf/p535.pdf "Business Expenses"
on page 3, under "What Can I Deduct":
--start of excerpt  ---
To be deductible, a business expense must be
both ordinary and necessary. An ordinary ex-
pense is one that is common and accepted in
your industry. A necessary expense is one that
is helpful and appropriate for your trade or busi-
ness. An expense does not have to be indispen-
sable to be considered necessary.
--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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