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Nonprofit Law/Defraying the costs for competitve wear for gymnasts



We are 501(c)(3) Booster Club that helps make competitive gymnastics more affordable for team members.  We currently have a large carry over balance and are looking for ways to spend it.  A great "problem" to have, to be sure.  

Unfortunately, we are divided on the issue of helping our families defray the costs of competitive wear.  Current costs are approximately $525 for a leotard and a warm-up set. Some board members feel any contribution toward this expense would be considered a gift and therefore non-compliant with the 501c3 rules.  Others feel this is yet another way to defray the expenses of competing, just like meet fees and coaches expenses, and helping with this cost would allow more girls to join in competitive gymnastics.

So my question is, if our club were to pay a portion of every gymnast's competition wear (say $250), the gymnast's family paid the balance, and the gymnast retained ownership of the competitive wear, would that be in violation of the IRS rules?

Thank you in advance for your time.  I dug through all you responses and the time you have given to everyone's questions is to be commended!

Inurement (benefits to insiders) is discussed by the IRS at and specifically note, on the bottom of page 10, "even a minimal amount of inurement can result in disqualification for exempt status, whereas private benefit must be substantial in
order to jeopardize exempt status."

See on pdf page 10 we that the even a small amount of private inurement is fatal to exemption. In Spokane Motorcycle Club v. U.S., 222 F. Supp. 151 (E.D. Wash. 1963), benefits were found to inure to private individuals where refreshments, goods and services
were furnished to members and that precluded exemption.

Internal Revenue Code section 501(c)(3) which is available at (on page 2, first column) provides, in part, that the 501(c)(3) organization must be one of "Corporations, and
any community chest, fund, or foundation, organized and operated exclusively for religious, charitable ...or educational purposes ... no part of the net earnings of which inures to the benefit of any private shareholder or individual".

The term "private shareholder or individual" is defined in regulations 26 C.F.R. 1.501(a)-1(c) "The words `private shareholder or individual' in section 501 refer to persons having a personal
and private interest in the activities of the organization." on the right column of page 2

Surely the families involved in the work to obtain in funds for the organization would be viewed as persons having a personal and private interest in the activities of the organization.

$525 is what the IRS would call a substantial amount. See on the bottom of pdf page 2 "Genuine public benefit often provides an incidental benefit to private individuals. But if private interests are served other than incidentally, exemption is precluded."

If the leotards are returned after each season I would not think that there would be an issue of the benefits being more than incidental, but if they are not returned, then I believe that it is clear that the personal benefits would be more than incidental and very substantial.

You are welcome.

My summary of IRS regulations relating to 501(c)(3) 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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