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Nonprofit Law/Paying for fundraising on contract basis


We are a Civil War Reenactment 503(c) organization. At our reenactments/battles, we want to set up a tent where the public can put on Civil War outfits, hold a musket, and have their digital picture taken for a fee of between $5-10. We want to pay the Civilian reenactors (teenage girls) something like $1-2 per picture for their time running the activity as Independent Contractors. 1) Is the picture fee a tax-deductible donation since the only cost to the organization is the payment to the girls running the activity so the picture is a "low-cost item."; 2) Can we pay the girls (who are Civilian Members of our organization) a per-picture fee and not lose non-profit status? The net proceeds would be used by the organization to buy loaner gear and educational materials.

I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. Therefore, I am assuming you are referring to a 501(c)(3) organization (even though your wrote 503(c)).

1. I don't know whether the girls would be considered by the IRS as employees or independent contractors. There are many factors that the IRS uses to conclude whether
someone is an employee or an independent contractor and the
nonprofit corporation's treatment of someone as an independent
contractor instead as an employee for tax purposes may be
incorrect and subject the nonprofit organization to taxes and
penalties. For the factors the IRS considers, see

Note on that page at the bottom "If you want the IRS to determine
whether a specific individual is an independent contractor or an
employee, file  Form SS-8 (PDF), Determination of Worker Status
for Purposes of Federal Employment Taxes and Income Tax

The IRS may determine the status, but it would possibly take then
6 months,,id=99921,00.html

Anyway, you may hire girls as long as you do not pay them more than what is a reasonable amount. The IRS does allow 501(c)(3) organizations to give someone
compensation just so it is not more than what  is reasonable.
Starting on pdf page 10 of
the IRS discusses many of the factors it would look at to decide
whether a salary is reasonable.

 IRS Publication 1771 about Charitable Contributions, explains, starting on pdf page 7:
--- Start of Excerpt ---
Goods and services are considered to be insubstantial if
the payment occurs in the context of a fund-raising
campaign in which a charitable organization informs
the donor of the amount of the contribution that is a
deductible contribution, and:
1.  the fair market value of the benefits received does not
exceed the lesser of 2 percent of the payment or $102,* or

2.  the payment is at least $51,* the only items provided bear
the organization’s name or logo (e.g., calendars, mugs, or
posters), and the cost of these items is within the limit for
“low-cost articles,” which is $10.20.*
--- End of Excerpt ---

The first situation does not apply because the value of the photo is more than 2% of the payment.  The second does not apply because the payment is not at least $51.  

Harvey Mechanic, 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.  

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Harvey Mechanic


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 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 "" without the quotes and then add your search terms before hitting enter.


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.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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