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Nonprofit Law/Isolated Fundraisers

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QUESTION: Hello Sir,

I have utilized your services in the past, and I am very grateful that you provide them.

We have a 501(c)3 at our gym, and a group has initiated a Jiffy Lube Live Fundraiser (JLL is a concert venue where you can volunteer and you organization receives funds), and they have excluded the majority of the gym. They are only making it available to gymnastics levels 6-10. No one else is allowed -

Is this legal?

ANSWER: I have read one 501(c)(3) organization's FAQ relating to those types of events and it appears that the concessioner is conspiring with the 501(c)(3) organizations and individual workers to evade federal employment taxes by treating employees as independent contractors. http://chantillychoral.org/documents/Jiffy-Lube-FAQs.pdf

The IRS explains at http://www.irs.gov/pub/irs-pdf/p5137.pdf on page 87. "A volunteer is an employee under common law if an entity has the right to direct and control the volunteer's performance,
not only as to the results to be accomplished, but also as to the methods by which the results are accomplished."

Therefore, the operation is not legal. But, as to your particular question, a private company may discriminate in hiring for certain reasons but not for others.  For example, the federal civil rights law of 1964 provides:
--- Start of excerpt ---
(a) Employer practices
It shall be an unlawful employment practice for an employer—
(1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; or
(2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.
--- End of excerpt ---
https://www.law.cornell.edu/uscode/text/42/2000e-2

Discrimination in employment based upon gymnastic levels is not prohibited by law.

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: Interesting -

Even though it is fundraising for a 501(c)3 and not technically employment; and the activity provides benefit to some portion of the organization and not the whole?

The FAQ you provided is exactly how the gym manages the concerts. Would the funds earned technically be "income" and subject to tax?

Thank you for your time!
Scott

Answer
I don't know what you mean by "technically".  I try to avoid that term.  Either something is legal or not.  Here it is illegal.  I explained in an earlier email the IRS treatment of assignment of income. There is no exception if the assignment is to a 501(c)(3) organization.

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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