You are here:

Nonprofit Law/non profit donating to another non profit

Advertisement


Question
We are non profit supporting a public school band program.  We are not under the school boosters, we are separate organization.

A local Rotary organization will be staffing a concession booth at a local event. Concession company will donate to Rotary a percentage of money they generate from food sales.
Rotary needs a lot of help and have asked the boosters if the members and kids would like to help.  As an organization that helps the community, Rotary would like to donate 90% of whatever they receive from the concession company to the boosters.
Would this be ok for Rotary to donate to us?

We have another option.  The boosters staff the concessions stand, Rotary helps us, and we give 10% of whatever the concession owner donates to our program for Rotary.
I do not think this option seems right for some reason.

Your opinion would be appreciated.

Answer
First I should explain that what the concession company is paying is not, under tax law, considered a donation.  The IRS has written on page 1 (first column under "Introduction") in their publication 526 "Charitable Donations", which is available at: www.irs.gov/pub/irs-pdf/p526.pdf "A charitable contribution is a donation or gift to, or for the use of, a qualified organization. It is voluntary and is made without getting, or expecting to get, anything of equal value."

The concession company is paying for labor, which appears not to be by independent contractors but by employees (the Rotary people).  The presumption is that the amount that the for-profit concession company pays to the Rotary organization is not at all a donation.  In an Internal Memorandum from the year 2000,"Fund Raising Issues" the IRS explained further, "where a payment is made in return for an item or benefit, the presumption is that such payment is the purchase price and not a gift."
www.irs.gov/pub/irs-utl/topict00.pdf on page 12

Therefore, the workers are employees and their earnings are treated just like any other employment income.

If your booster group asks members, kids or others to work with the Rotary group, then the individuals may certainly put in their time but I suggest that the booster organization not get too involved in any paperwork other than stating that they will certainly accept funds from the Rotary group.  I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. Therefore, I am assuming that your booster organization is such an organization.

You asked specifically "Would this be ok for Rotary to donate to us?"  Yes, in respect to your organization, it is ok.  I am not answering in respect to the Rotary's action being ok for them, though, as you are inquiring about your own booster organization.

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.

Nonprofit Law

All Answers


Answers by Expert:


Ask Experts

Volunteer


Harvey Mechanic

Expertise

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.


©2016 About.com. All rights reserved.