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Nonprofit Law/Entry Fees for 501c3 event by outside entity.

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QUESTION: "We are holding a fundraiser for a 501c3 organization, but run by a group of people who do not work for with the 501c3.  

There is an entry fee of $50/person. I understand that these monies are not tax deductible. The entry fees cover the cost of the event.  Is the 501c3 organization required to report the entry fees as income?"

ANSWER: It appears that by "we", if you are not working without compensation, you are referring to an entity that is what the State of Virginia refers to as a "professional solicitor". http://goo.gl/jWzFgI

You are receiving $50 per person and, under a contract, you are then giving something to the 501(c)(3) organization.  Whatever they received is what they would report as income.  If you have facts that are different from what I assumed above, please give me the details of those facts. After you give me that information I will reply further.

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: Harvey, thank you for the information.  Here is some clarity...

4 years ago a couple of us organized a fundraiser to benefit Two Top Mountain Adaptive Sports Foundation.  We do not work for them, we just believe in their work and want to see the program grow.  For the first 3 years of the event, I have personally managed the registration fees and all of the tax-deductible donations have been made via the Two Top website.  This year, Two Top has taken control of the event from us and now refer to the event as their event.  Two Top's donations exceeded $100K for the first time and, according to the organization, they can and expect to be audited by the IRS.  Two Top has also informed us that the registration monies have to be reported as income.  So, for tax purposes, would Two Top be required to report the registration monies as income; 2) If so, could we avoid having to do so if the registration monies were directed to an external account thay would be seperate from the Two Top organization?

Answer
Well, it appears from what you wrote that you are concerned with the registration fees that have already been paid and maybe in previous years.  I would need to see the actual path of those fees and whether they were, at least for some time, held in an account of a non-exempt entity.  If you are asking about previous years when the two people (including you) organized an event for Two Top, let me know whether you received any compensation for that work that you did, along with whether any of the fees went into a non-exempt account. After you give me that information I will reply further.

You are welcome.

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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