Nonprofit Law/501c3 question

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QUESTION: Hello, you answered some questions for us last year.  http://www.allexperts.com/user.cgi?m=6&catID=2266&qID=5052739

We are gymnastics booster club.  We have another question about 501c3 status.  If we keep individual accounts and as a secondary purpose act as a conduit for parents to pay competition fees can we then refund parents any excess money as long as we do not give them any money that was fundraised?

For example- It costs approximately $200/month for fees related to competition.  Parents pay into their own individual account for their child to compete.  Booster Club is then able to raise enough money to cover a competition for all the children whether or not they are in BC.  This makes the fee less but some parents have paid ahead, can we then refund them their own money?

ANSWER: Yes, you can refund up to the amount that the parents deposited.

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

---------- FOLLOW-UP ----------

QUESTION: Great!  So just to verify we can require parents to pay their competition fees and facilitate the paying of those fees whether or not they join BC.  But can not penalize them by not using fundraising towards their child if they do not join BC?  We would need to make sure any money fundraised goes towards every child on the team, correct?
The concern is that it costs approximately $2000/child to compete and with 35-50 kids we will not be able to fundraise the entire amount.  We would keep an individual account record that never had fundraising money deposited as well as a general fund account that we would use to pay to benefit ALL the team kids.

ANSWER: You can not require the parents to do anything.  However, the team or gym can require the parents to make payments for competitions through your organization. You are correct that a 501(c)(3) organization can not penalize families for not using fundraising.  Money fundraised needs to go to all youth similarly situated in gymnastics. 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 as it details that issue.

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



---------- FOLLOW-UP ----------

QUESTION: That makes sense.   If the gym and/or team requirement is that they pay into their account m, if they don't pay into their account then we would not be able to pay competition fees not as a penalty but simply because they didn't have the funds.  
the gym/team would need to handle that with the individual?  Would BC be penalized for not taking general fund money to cover that childs expenses if they did not pay their fee?  Again all fundraising money would be used towards the common good of the whole team.

Also what is the benefit to the parents joining BC?  If they don't join they do not have a general membership vote, correct?  They also could not elect officers or be an officer?

Answer
The gym/team would need to notify families individually as to how they require fees be paid.  As you can read in that link that I sent you in my last response, the IRS could revoke the 501(c)(3) organization status of any booster organization that did not follow IRS regulations, such as by discriminating against a family on the basis of their lack of fundraising or membership in the booster organization.  But there is no penalty to the 501(c)(3) organization if the gym/team are requiring a payment through the booster organization for not using general fund money to cover a child's expenses if they did not pay their fee.

The benefit of parents joining a 501(c)(3) booster organization is the same as if they join the Red Cross.  They can do charitable work.  There is no material benefit, though. If, as is often usual, all families of similarly situated gymnasts join, then there is, of course, the benefit that they can sell items or otherwise raise funds for the youth's activities and the sales income is not taxable.

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. 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

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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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