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Nonprofit Law/Pass-thru/consolidation of funds

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Question
I have a question regarding what I believe may be a unique pass-thru funds situation.  Our booster club is used by the program sponsors heavily for consolidating funds for students.  For example, entry fees to specific events, group purchases for supplies and to consolidate funds for purchases for animal projects by the teacher/sponsors on their behalf, as a few examples.

The booster club collects each students portion.  The booster club will then write a single check to the event or vendor to pay the amount collected for the specific event/supplies etc.

The question is 2 fold.  Is that a harmless pass-thru or does that create an issue being a 501(c)3?  Are those funds considered as funds received for reporting purposes such as the 990?  In other words, are they considered "Gross receipts".

Thank you for any assistance you can provide.

Answer
If the booster organization is legally required to pass through 100% each of the payments then they may decide to follow a certain accounting system that does not call those payment income, but use them as increases to assets and increases to liabilities.  As stated by CPA, Louis Gutberlet, "pass-through items or reimbursable expenses are assets, not expenses." http://goo.gl/Mjkq3q

The IRS instructions to Form 990 on page 9, right column, have the instructions for "Item G. Gross Receipts":
---Start of Excerpt---
    On Form 990, Part VIII, column A, add  line 6b (both columns (i) and (ii)), line 7b (both columns (i) and (ii)), line 8b, line 9b, line 10b, and line 12, and enter the total here.
---End of Excerpt---
http://www.irs.gov/pub/irs-pdf/i990.pdf
 None of those figures in the computation of gross receipts includes any pass-through items treated as increases in assets and liabilities. Therefore, they are not considered "Gross receipts".

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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