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Nonprofit Law/Scrip and individual fundraising accounts


As a member of a 501c3 booster organization, I have concerns about our individual fundraising accounts.  I have read answers you have provided to others as well as imformation on other websites.  I recently came across a booster website noting that proceeds from scrip sales are permitted to go to individual accounts because those proceeds are rebates rather than earnings and are therefore permitted by the IRS.  This group also states they have verification of that position from an attorney.

I would like to know your thoughts on this.  Scrip is a big part of what goes into our individual accounts and it would be a relief if the position taken by this other group would turn out to be appropriate.

Thank in advance for your time.

Have them send me the written legal opinion letter from the attorney and I will comment further, but, note that, in August, 2013 the U.S. Tax Court supported the revocation of 501(c)(3) organization status of a formerly exempt organization and noted that a parent's fundraising was earmarked to reduce what otherwise could be a $1,400 payment the parent would have to pay
out of his/her pocket. The direct linkage of a parent's fundraising resulted with paying expenses for that parent's child and was a very specific benefit obtained by the insider.  While the parent may not have been paid cash, the parent nevertheless ended up escaping having to write a check for the amount of the benefit. Families who did not fundraise did not receive any benefits from the purported a 501(c)(3) organization.

It appears from what you have written that the individual family, representing that they are selling for a 501(c)(3) organization,  is selling store credit to persons at a certain price and getting, from the store, an amount put into the 501(c)(3) organization.  If the work of the family results in the amount going into the individual accounts the problem is still the same as in the about Tax Court case. My summary of IRS regulations relating to 501c3 booster organizations is at: and you may be interested to read that.

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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