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Nonprofit Law/Gymnastics Booster Club 501(c) 3

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QUESTION: It has come to our attention that our booster club has unfortunately not been following all of the 501 regulations for several years. The executive board of the club has worked for the past year to gather information and try to change our bylaws and standing rules so that they will be tax compliant. We have read the IRS publication (http://www.irs.gov/pub/irs-tege/eotopica93.pdf) as well as many of your answers, but still have a few questions.

We would like the following to be our first standing rule:
1.   MEMBER:  The USAG # fee must be paid by August 31 of each year as well as the $65 GSGBC dues by August 31 of each year, in accordance with  her designated level in order to be a member of the booster club.  If a member has not paid such dues & fees, they will not receive USAG numbers.  A member in “good standing” is one who has met all financial obligations as prescribed in the Bylaws & Standing Rules.  In the event the member becomes delinquent in dues, commitments, or other fees, their membership will be revoked.  Entry fees will not be submitted for gymnasts whose commitment fees are not paid in full by the designated date.  He or she will be ineligible to participate in fundraising and their child will no longer be eligible to compete.  Membership status can be restored as soon as all financial obligations are current.

The dues required are to pay for the competitive leotard rental fee. Parents are also required to pay 50% of the meet fees for their child. The booster club pays the additional 50% as well as all coaching fees. All fees are due before the competition season starts. If a parent has not paid their fees, can we legally not allow their child to participate in a meet?

The booster club would also like to pay 100% of all State, Regional, and National meet fees for the gymnasts that qualify for those meets. While nearly all of our gymnasts qualify for State, only a few will qualify for Regional or National meets. Are we still tax compliant if the booster club pays for those meet fees?

Lastly, if a gymnast family chooses to not be a member of the booster club, are we still required to pay 50% of their meet fees or is that family required to pay 100% of their fees as well as a portion of the coaching fees?

I apologize for the length of this question and thank you in advance!

ANSWER: My summary of IRS regulations relating to 501(c)(3) booster organizations is at http://goo.gl/IdQwML and you may be interested to read that. You will see there that, even though a gymnast family chooses to not be a member of the booster organization, that booster organization is required to pay 50% of their meet fees and coaching fees and anything else that the booster organization pays for other, similar gymnasts if the booster organization wants to comply with IRS regulations.

Otherwise, such an operation would be what the IRS calls a cooperative.  A cooperative is not qualified as a 501(c)(3) organization.  A 501(c)(3) booster organization is to be a charitable, not a cooperative, organization. A charitable organization, like the Red Cross, does not require beneficiaries to work for the Red Cross in order to receive benefits.

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.  http://goo.gl/QS9wCH

The booster organization may decide to fund those who go for Regional or National meets if that decision is not based upon the individuals who each year end up going to those meets.

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: Thank you so much for your quick response! I reviewed the link and have one additional question. If a member of the booster club has neglected to pay their USAG dues, club dues, and the 50% meet fees for the meets they have chosen to attend, is the booster club required to pay for those expenses? Would the booster club be able to suspend the gymnast until their financial obligations are met or is their some other way for the booster club to recoup their loss?

Additional information: All fundraising money is put into our general fund which is used to pay coaching fees and the percentage for all competitive gymnasts meet fees. While we request that parents participate in fundraising activities, we do not require it.

Thank you again for your help! As parent volunteers, it has been a difficult year trying to find the best way to become tax compliant and still keep the essence of our club. Your information has been quite helpful on many of our questions!

Answer
You are welcome. A 501(c)(3) organization has no responsibilities other than raising funds and distributing grants in a manner that is not prohibited, such as giving more to families that are members of the 501(c)(3) organization or work for the organization.  It is not supposed to be involved in policing whether a gymnast has or has not paid fees to a third party, such as to USAG, to coaches, or for meets. A booster organization can not suspend a gymnast because the booster organization does not control the gymnasts.  For example, an independent organization that grants college scholarships can not suspend a student from the university the student attends.

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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