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Nonprofit Law/501(c)(3) Earmarked Donations.

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Question
I am on a the board for a High School Booster Club.  The Club serves all clubs, sports, students, and teachers.  We prepare a yearly budget.  During the year, clubs request grants and we utilize the budgeted money to help with their grant requests.

Recently we have had a specific sport requesting to utilize our 501(c)(3) status to receive money for its club.  They want to setup things like "GoFundMe" for people to donate money to the specific club, but utilize our 501(c)(3) status.

I've read items where donations can't be earmarked to an individual.  But, can they be earmarked for a specific class (ie. club)?

I have suggested they setup their own 501(c)(3), but they don't want to do it.

Is what they are wanting to do lawfull under the 501(c)(3) rules?

Answer
A 501(c)(3) organization may have many bank accounts or many funds and the funds may be used for different purposes and staffed by particular workers. What that specific club (which is, evidently a part of the high school) wants to do is to have your organization (through them) set up a site for accepting donations that would be used for the particular group sport (class).  That is allowed, as long as the specific group is not composed of one or only a few individuals. Your 501(c)(3) organization would need to account for all of the funds collected and dispersed and your organization is responsible to see that the funds are used for a purpose allowed for 501(c)(3) organizations.

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

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.


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