Nonprofit Law/Reimbursement

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Question
We are a 501c3 booster club at a competitive cheerleading gym.  We have been raising money working events at Gillette Stadium.  Our gym which has a different tax id number has paid for all the upcoming seasons competitions for the athletes.  Can we reimburse the gym for what it has paid for our athletes?

Answer
A 501(c)(3) organization may reimburse employees or volunteers for expenses that the 501(c)(3) organization could have paid for initially and directly. See page 41 of IRS Publication 535 at
http://www.irs.gov/pub/irs-pdf/p535.pdf starting in the first
column under the heading "Accountable Plans" which the organization
must have.  That section is written for employees but also applies
to volunteers.
See the section under "Volunteer Officers/Workers" at
http://www.irs.gov/charities/article/0,,id=131083,00.html
which is written specifically for Exempt Organizations and refers
to that Publication 535.
---Start of Excerpt--
A plan under which an employee or volunteer is reimbursed for
expenses or receives an allowance to cover expenses is an
accountable plan only if:

   *  There is a business connection for the expenses;
   *  The employee/volunteer adequately accounts for these
expenses within a reasonable period of time; and
   *   The employee/volunteer returns any amounts of excess
expenses within a reasonable period of time.
---End of Excerpt--

But the procedure is different when an organization, whether for-profit or nonprofit reimburses another entity.  That would be in reference to a contract, for example with a building contractor who, acting under an contract with the client that has, as a clause that the contractor would be billing for expenses paid by the contractor in connection with the construction.  Such a contract should be in writing but it could be oral. Your situation is somewhat different in that the 501(c)(3) booster organization does not contract for services, but only gives grants for youth activities, but, if you already had an arrangement with the for-profit gym that your organization would reimburse the gym for what was paid for the athletes, then it is fine to reimburse, as a 501(c)(3) booster organization could validly pay such fees directly.

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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