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Nonprofit Law/Assessment Refunds

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Question
We are a 501(c)3 booster club for a competitive gymnastics team.  We are a small group and fundraise to offset the over teams expenses.  Because we currently do not raise enough funds to cover the total cost for a season we have the parents pay assessments.  The current way we do it is we balance the coaching fee's across all girls (regardless of what meets each girl attends).  We usually are under budget slightly which is where the fund raising proceeds come in.  What ever the overages from the season were we use the funds to pay the balance.  We usually are close in our estimate and by the end of the year have very little left in the general fund (my point being we are not stock piling the parents assessments instead of using all fundraising proceeds to pay for competitions).  We need both to cover the competition expenses.  Couple questions:
1.  Is what is left in the general fund refundable to the parents?  Argument being the fundraised funds were used first and therefore anything left was overages by the parent?
2.  Because not all girls make it to the State or National level and this tends to be where most of our overages come from is that considered a private benefit to those who qualified to attend?  Parent reasoning is there childs season ended prior to the girls who qualified beyond regionals but yet the assessment was the same across the board.  They feel as those these girls are getting a private benefit that their child is not?  Is this a valid argument.
3.  Ive read a lot about not being able to exclude girls from competition because their requirements (or commitments) were not met.  What if they did not pay their assessment?  In reality we do not have the funds to register them for meets, so without their assessment payment we cant afford to register them.  Im just a little confused because of other questions in regards to being able to charge a membership fee etc..
Thanks

Answer
1.  Your "assessments" can not be actually assessments as a booster organization only engages in charitable work.  But you may be using funds gathered from parents as a convenience to the families and to the coaches or other suppliers of goods or services that another entity (the gymnastic team) has contracted for.  The 501(c)(3) organization that is a booster organization should not have a contract with the suppliers for services, so there can not be any assessment.  Anyway, your organization can account for the funds from the parents (they are not deductible donations) and then refund part later. Make sure your accounting is kept with a separate heading like "funds held for families obligations to 3rd parties."

2. The Board of Directors of a 501(c)(3) booster organization may decide to have a policy that it will fund girls who go to the State or National level in addition to the regular team activites.  It is not required that the 501(c)(3) organization only fund one level and not other levels. However, the 501(c)(3) organization may not allow the individuals to collect for their own fees using the name of the 501(c)(3) organization.  That is discussed in my summary of IRS regulations relating to 501c3 booster organizations is at:
http://goo.gl/ULw6f6
and you may be interested to read that.

3.  The booster organization, as I wrote in #1, have a policy for the convenience of the parents and, therefore, if the parents do not pay such amounts which you called "assessments" the 501(c)(3) organization can notify the provider or team that they may want to exclude that family from participation.  It is not the 501(c)(3) booster organization that is prohibiting the particular girl from participating.  It would be the team or the provider.  Membership fees of 501(c)(3) organizations are different and, if you want to inquire about those, after reading my summary of 501(c)(3) booster organization rules, let me know.

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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