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Loren
Loren, Attorney
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Experience:  30 years experience representing clients.
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my daughter has paid a participation fee to the local youth

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my daughter has paid a participation fee to the local youth cheer organization. i received an email tonight stating that if i dont pay the mandatory fundraiser fee then she will not be able to participate anymore. this organization is a 5013c organization, isnt this considered against the irs rules for fundraising?
Thank you for using JustAnswer. I am JudgeLaw and I will do whatever I can to answer your question and provide excellent service.

I am sorry to hear of your dilemma. I realize how frustrating this is for you, but I believe I have information which you will find helpful.

Unfortunately, no, it very common among sport clubs and leagues to have a fund raising commitment for the team or league. The 501c3 designation merely allows donations to be tax deductible for the donor.

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Customer: replied 3 years ago.

from what i have been reading on the irs sites and case law, this is considered anywhere from quid pro quo, to coercion, to cooperative fundraising. from everything ive been reading, by demanding payment in excess of the participation fee and calling it a fundraising fee, it can negate their non profit status. i feel that what i found out on my own was much more helpful.

I do not know what you have seen, but fundraising commitments are common and permissible so long as it is not a breach of contract and any non exempt revenue is reported as income.

The IRS may have a problem with a 501(c)(3) organization allowing individuals to engage in sales activities that, even in part, go for their own, private benefit, but that does not seem to be the case in what you describe.

If you prefer, however, I can opt out to open the question to other experts.

Thank you.

JudgeLaw
Customer: replied 3 years ago.

this particular fundraiser is not a sale activity. its just handing the organization money. according to the irs, when the organization keeps a record of who paid and who didnt, its considered an individual fundraising account, and that along with the cooperative fundraising can disqualify the organization


 


 


 


 

My apologies, I thought you meant committing to participation in fund raising activity. What you are describing is a surcharge on top of the participation fee and is, indeed, an illegal breach of contract. For example, if a private school notifies parents, before the time that the school year starts, that the total fees will be $5000 and then the parents agree and pay the fee and the child starts classes, the school can not later add assessments and expect that those additional assessments would be enforced by a court of law.

If the organizers are receiving any private benefit, the cooperative fundraising could jeopardize the charitable status. The existence of ANY private inurement will disqualify an organization from public charity status, while a limited amount ‐‐ or insubstantial amount in IRS language ‐‐ of private benefit activity is tolerated.

Thank you.

JudgeLaw
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