Nonprofit Law/IFA's



I have a couple of questions about IFA's. We "volunteer" with one of those companies that run concession stands at the sporting events in town and the money we earn goes into the IFA of our children minus a 5% to the General Band Fund. These accounts are used to pay for band camp, competitions, and trips. Is this okay as a 501 c? What is the maximum that the Booster Club can take out of the payout for the General Band Fund? Should this percentage be voted on by the Booster Club or just by the Executive Board? The Board has just voted to increase all fundraisers to 20% to the General Band Fund. I was just wondering about the implications as a 501 c. They also have mandatory fundraisers to go on some of the trips.

Thanks for your insight!

First I should point out that the IRS explains at 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 workers of the concession stand would, under employment tax law, be treated as employees and as employees who have assigned their income to the IFA and the General Band Fund.   The IRS explains the "assignment of income doctrine" starting on the bottom of the middle column on page 2 of their Publication 525
--- Start of Excerpt ---
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.
---End of Excerpt---

A 501(c)(3) organization may not be involved in such arrangements as it appears that they would be involved in conspiracy with eh concession company and the workers to evade federal and state income tax and employment tax laws. Further, a 501(c)(3) organization may not require families to raise funds as a condition to giving benefits to a family member. My summary of IRS regulations relating to 501(c)(3) booster organizations is at and you may be interested to read that as it specifically addresses that issue.

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. For me to consider your individual situation and how the law applies, I would need to gather more information.

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. 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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