Nonprofit Law/high school booster club mandatory "donations"
my daughter's high school soccer coach told her this week that if she/our family did not make a donation of at least $100 to the athletic booster club (separate 501c3) that she could not play in an upcoming out of town high school soccer tournament. is that legal? Thanks
First I would like to disabuse the coach of the notion that the $100 that he is referring to is a "donation". The IRS has written on page 1 (first column under "Introduction") in their publication 526 "Charitable Donations", which is available at: www.irs.gov/pub/irs-pdf/p526.pdf "A charitable contribution is a donation or gift to, or for the use of, a qualified organization. It is voluntary and is made without getting, or expecting to get, anything of equal value."
That conclusion is supported by Singer Co. v. United States, 449
F.2d 413, 418, 196 Ct.Cl. 90 (1971), citing to a House Report.
Therefore, I will address the $100 as a "fee" that the coach is attempting to assess through the intermediary of the 501(c)(3) organization, which apparently would be under legal requirement, by arrangement with the coach, to pay the expenses of the out-out-town tournament. The IRS often uses a "Substance over Form" doctrine. The concept of the substance over form doctrine is that the tax
results of an arrangement are better determined based on the underlying substance rather than an evaluation of the mere formal steps by which the arrangement was undertaken. For instance, two
transactions that achieve the same underlying result should not be taxed differently simply because they are achieved through different legal steps. As the Supreme Court stated some years ago in Minnesota Tea Co. v. Helvering, 302 U.S. 609, 58 S. Ct. 393, 82 L. Ed. 474 (1938), "A given result at the end of a straight path is not made a different result because reached by following a devious path." 302 U.S. at 613, 58 S. Ct. at 394.
I am assuming that the high school is a public high school in Texas. Most states have regulations that preclude teachers (and coaches) from independently and, on their sole authority, assessing fees to students. However, your situation may be an exception, which involves fees that are for a tournament that the coach may not have foreseen far in the past because it may have been by invitation, depending upon the recent win-loss record of the teams. In any case, I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. Your matter is controlled by state law and states may differ somewhat with how they would treat such issues. But I will direct you to the Texas Education Code which is available at http://www.statutes.legis.state.tx.us/?link=ED
. I don't know if anything there is relevant, but suggest that you contact your local school board to inquire as to their policy about a teacher or coach assessing fees on an ad hoc basis. If the coach does not have authority to assess a fee that would go directly to the school, then he would not have authority to require a fee to be paid by the family directly to a third party, such as the 501(c)(3) organization, to the tournament organization or to a for-profit entity.
My summary of IRS regulations relating to 501(c)(3) booster organizations is at http://goo.gl/IdQwML
and you may be interested to read that. I have something in there about such organizations giving benefits to certain people. Arrangements with a school district to take care of payments for a tournament would not be considered to be "benefits" given by the 501(c)(3) organization to youth unless the 501(c)(3) organization somehow, in their payments, specifies which youth on the team are covered by the payments (or which youth are not). It appears that the 501(c)(3) organization may have agreed to inform the coach who has paid at least $100 and, if and when the 501(c)(3) organization comes to know that the coach would not be allowing youth to play if they have not paid the $100, and then the 501(c)(3) organization informs the coach who has not paid (or who has), then the 501(c)(3) organization would then be conspiring with the coach to try to get around the IRS regulations for 501(c)(3) organizations (they need to benefit all similarly situated team players).
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.