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Nonprofit Law/501(c)(3)-Donations or Expense


Background: we are a local non profit organization. Expenses are about 8,000 a year. Donations about 30,000 a year through various events that we organize. No officer gets paid. It is all Volunteer time. Our main purpose is to provide money/help to people in need.

If we give scholarship money based on need:
Are we allowed to claim this as a charitable donation or an expense? Do we have a choice? What would you recommend if we do have a choice?

We work some local events for meager pay but then we put the money in the account for the organization. Is this considered a donation by the event or is this considered income for our organization? Is there something else that I can classify this as? We publish everything and I want everything to be visual and honest in every way. I just dont know what my options are for this.

You asked that you want to "give scholarship money".  The word "give" indicates that it is an expense. Note, that, for scholarships the IRS has published:

--- Start of Excerpt ---
Generally, distributions made to
individuals may advance educational
purposes if selection is made:
In a non-discriminatory fashion in terms
of racial preference,
Based on need and/or merit, and
To a charitable class in terms of being
available to an open-ended group, rather
than to pre-selected individuals.
A scholarship or fellowship is tax free
to the recipient only if he or she is:
A candidate for a degree at an eligible
educational institution; and
Uses the scholarship or fellowship to
pay qualified education expenses.
Qualified education expenses include
tuition and fees; and course-related
expenses such as books, supplies, and
equipment. Room and board, travel,
research, clerical help, and non-required
equipment are not qualified education
expenses. See Publication 970, Tax
Benefits for Education, for additional
Selection of individuals using a lottery
system generally has not been approved
by the IRS.
--- End of Excerpt ---
From  page 23 on instructions to Application for Exemption in middle column

An example of an approval Scholarship Grant-Making Procedure is the
4 page letter from the IRS that may be read or downloaded (save) at

As for working at a local event, it appears from what you wrote that you are employee and you are getting money for your work and that is taxable to you as income.  You may donate money to the organization, but that is another issue.

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


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. 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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