Nonprofit Law/Athletic Booster Club
I was recently voted in as VP of my daughters Cheer Booster Club. This is a national competitive cheer team and is incredibly expensive.
The person who initially started the Booster Club is no longer here as her child has graduated.
My concern/question is whether or not we are keeping current with compliance.
We are made up of approximately 40 members. We volunteer to work concession stands for our local coliseum when they host concerts, ball games, ect. The Coliseum then pays the booster club a small commission per event. That commission is then divided equally between the accounts of each child who's parent is volunteering for that specific event. For example: if 7 of the 40 members volunteer to work concessions and the coliseum pays us $500.00, that $500.00 is divided by 7 and the monies pay for the fees, practices, etc for their child(ren). The money is paid directly to the Cheer organization and never to the parents. The coliseum gives us a number of events to cover. To keep it as fair as possible, we assign those shifts to our 40 members(only about 20 are active) on a first come first serve basis. The next event may need 15 people instead of 7. The payment to the booster club for that event, gets divided equally between those 15 accounts, etc, etc.
We have a bank account in the booster club name but I have no idea if we have any required filing with the IRS or if any is actually needed since no money is paid directly to the parents, we don't pay for any expenses of the cheer company, ect... this is merely volunteering our time for an unknown amount of pay all in an effort to reduce our monthly cheer expense so our kids can cheer, learn what a team is about, have fun, stay out of trouble and grow together .
Any guidance you can offer is greatly appreciated.
Your group of 40 members appears to be composed primarily of members of families of the cheer team. Therefore, when they work they are expecting benefits to go to their family members (no fees or reduced fees). The workers, therefore, are not considered by the IRS as volunteers. For example, the IRS has written "True volunteer firefighters do not receive, or have an expectation of receiving, compensation." page 9 of http://www.irs.gov/pub/irs-tege/win03_fslg_ng.pdf
Simply because the workers do not get payments directly made to them does not mean that they have not received compensation just like normal employees. The IRS explains the "assignment of income doctrine" starting on the bottom of the middle column on page 2 of their Publication 525
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Assignment of income. Income received by an agent for you is income you constructively received in the year the agent received it. If you agree by contract that a third party is to receive income for you, you must include the amount in your income when the third party receives it. Example. You and your employer agree that part of your salary is to be paid directly to your former spouse. You must include that amount in your income when your former spouse receives it.
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You wrote that you have no idea if you have any required filings with the IRS. 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 you are referring to such an organization. Links to latest published Form 990 Series -- Forms, Schedules and Instructions which are available at http://goo.gl/CTkSR
and there is the explanation as to which 990 series return to file.
You can check your status at http://www.irs.gov/app/pub-78
However, from what you wrote, your organization is not qualified as a 501(c)(3) organization. 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
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.
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. For me to consider your individual situation and how the law applies, I would need to gather more information.