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Nonprofit Law/Gymnastics Booster Clubs

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Question
QUESTION: Can membership be denied to an employee of the gym that has a competitive gymnast? (This employee is best friends with the owner of the gym and clearly doesn’t have the booster clubs best interest at hand). Does each member have the right to see what’s in other members accounts and what the money is being used for? (There aren't any individual accounts, all funds that come in are distributed evenly amongst the members and they decide what expense they would like to put it towards. Are there limits to what the funds can be used for, or can it be used for anything gymnastics related?

ANSWER: Let me know if the booster organization is a Delaware General Corporation and, if not, what type of entity it is.  After you give me that information I will reply further. I will also need to know whether the people who you refer to as "members" have the power, as in the articles of incorporation or bylaws, to vote for the Board of Directors.

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.

---------- FOLLOW-UP ----------

QUESTION: The booster club is incorporated in Delaware. The members of the club are able to vote on the officers.

Answer
This forum is only for federal tax questions regarding 501(c)(3) public charities as I have explained in my profile. The IRS does not have any regulation relating to your issue of the booster organization denying membership to an employee of a private gym.  That is an issue of what may be called discrimination and the Civil Rights laws may be useful if the organization is of a public, instead of private nature and the discrimination is in the area of education,
housing, employment or public accommodations, but not generally otherwise.

I  will inform you that the employee of the private gym may be discriminated against as most
types of discrimination are legal.  For example, federal tax laws provide for higher tax rates for taxpayers with higher income. Unless the reason for the discrimination is based upon race,
nationality, religion, or one of the other few prohibited reasons, an exempt entity may discriminate.

One site from Delaware has "In Delaware, the applicable provisions of the General Corporation Law apply to nonprofit corporations as well as business corporations. See 8 Del. C. §§ 101, 102." http://www.theincorporators.com/corp_nonprofit.html (4th paragraph)

Therefore, as to members' rights, you would look to Delaware Corporation Law.  A copy of the law revised up to 2012 is available at http://law.justia.com/codes/delaware/2012/title8/c001/
and I see nothing there that would require the corporation to allow members to see what is in other members accounts and what the money is being used for from those particular accounts.  Therefore, unless the articles of incorporation or bylaws provide members such access to those financial records, the corporation is not required to give them such access.

The funds can be used for anything directly related to the training of the youth and their activities in the sport. The organization must require receipts though, as it needs to be able to prove where the funds ultimately went.

My summary of IRS regulations relating to 501c3 booster organizations is at:http://goo.gl/ULw6f6and you may be interested to read that. Note that funds of the booster organization must not only go to members of the booster organization, but to all similarly situated gymnasts.

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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