Nonprofit Law/Band Boosters-Band Fees/Out of Town Competitions
Thank you in advance for your help. I have read through numerous questions/answers and also read your article on Booster Clubs. Here are my additional questions: I understand the concept of cooperative fundraising and not discriminating against students for nonpayment. What is your advice if a family signs a 'contract' understanding the fees due in order for the band to participate in competitions, purchase band show material and attend an out of town competition, yet doesn't pay. Because the boosters pay for a large portion of the 'extra activities, is it allowable to state in the By-Laws a student might not be able to participate in the out of town competition? Also, how does a Band Booster organization go about setting up an 'application ' process for financial assistance for the band fee waiver in 25% increments but not over 100% of the total band fees for the current year? Are there requirements we should have to ensure fairness, but only give to those truly in substantial need? Is that legal for a band booster group? We want to help families that can't pay, but ensure its fair and legal. Finally, can the Band Director say that the student can't attend the out of town competition if fees aren't paid or at least a good portion paid? Would that be like the tax evasion situation I read about in another question? Sorry last one: if assistance is ok if the boosters can financially grant it , can we put in the by-laws that it will be revoked and they would be liable for full amount of student is found in violation of any school/district/program policies including but not limited to Code of Conduct and Eligibility as it relates to absences and grade? Marching band is a class with a grade for participation and attendance, but competitions are extra activities. Thank you so much! I've read hours worth of material and will probably meet with an attorney as well since I'm new to the board and want to ensure we do everything correctly. Thanks again!!!!
A band booster organization does not have a band. A high school, for example, may have a band and the booster organization may support that band. If the high school informs the families that certain fees are required to be paid by families to the booster organization and that, if the parents fail to pay such fees, then the high school will not allow the students to participate in the particular activities. The booster organization may not, however, make rules for another organization -- here the high school.
The IRS does not have any particular application form requirements for grants to or for the benefit of individuals, but note that Revenue Ruling 56-304 provides:
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Organizations privately established and funded as charitable foundations which are organized and actively operated to carry on one or more of the purposes specified in section 501(c)(3) of the Internal Revenue Code of 1954, and which otherwise meet the requirements for exemption from Federal income tax are not precluded from making distributions of their funds to individuals, provided such distributions are made on a true charitable basis in furtherance of the purposes for which they are organized.
However, organizations of this character which make such distributions should maintain adequate records and case histories to show the name and address of each recipient of aid; the amount distributed to each; the purpose for which the aid was given; the manner in which the recipient was selected and the relationship, if any, between the recipient and (1) members, officers, or trustees of the organization, (2) a grantor or substantial contributor to the organization or a member of the family of either, and (3) a corporation controlled by a grantor or substantial contributor, in order that any or all distributions made to individuals can be substantiated upon request by the Internal Revenue Service.
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(cited with approval
in IRS instructions for Form 1023 Application for Exemption on pdf
page 23 middle column) at: http://www.irs.gov/pub/irs-
Grants do not need to be based upon financial need, but a 501(c)(3) organization may decide to make grants based upon financial need and, then, if they wish, they could require families to provide evidence of their financial situation, such as by requiring copies of federal income tax returns, or evidence of receipt of federal means-based assistance, such as food stamps.
You asked "Finally, can the Band Director say that the student can't attend the out of town competition if fees aren't paid or at least a good portion paid? Would that be like the tax evasion situation I read about in another question?". I am assuming that the Band Director is on a straight salary and does not make profit as is the hope of the for-profit gyms that are sometimes engaged in conspiracy to evade taxes. Therefore, if the school board has granted the Band Director the authority to decide who may or may not attend the out-of-town competitions, he may certainly require certain fees to be paid.
The 501(c)(3) booster organization may certainly state that a grant may be revoked if the student is found to be violating a school/district policy (as long as that policy is not, itself against IRS regulations, such as that student would need to be a member of the 501(c)(3) organization.
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.