I frequently learn a lot about nonprofit law from Harvey Mechanic’s All Experts Site. Mr Mechanic is an attorney that does a fantastic job of answering all sorts of questions about nonprofit law. I always learn a lot.
Recently, a parent from a small private school mentioned the need to do fundraisers and have everyone “do their fair share.” That is a pretty common expectation in activities involving children like youth sports leagues, scouting, etc. But to my surprise, Mr Mechanic has a problem with the “fair share” idea.
Here is Harvey Mechanic’s reply:
The statement that you made about “fair share” indicates that you do not want to operate properly. The fair share is applicable for a co-operative organization but not a charitable organization. In denying exemption to a purported 501(c)(3) organization booster organization, in 1992 the IRS at
http://viewer.zoho.com/docs/s2ca6g on page 6 stated “The reason you were created and your method of operation indicate that you are made up of a group of parents who have joined together to work cooperatively to provide funds to pay for the participation of their children in athletic events.
The expenses incurred by these children would otherwise have been paid by the parents. All parents of competitive team members are automatically members of your organization. Accordingly, members expect to receive a benefit in return for their membership. You pay no benefits to non-members.
Another, similar denial of exemption was issued by the IRS in 1990 and may be viewed at
Such an operation would be what the IRS calls a cooperative. A cooperative is not qualified as a 501(c)(3) organization. (emphasis added)
Wow! So does that mean homeschool co-ops cannot obtain 501(c)(3) status? Oh, no! I spend a lot of time helping homeschool co-ops obtain 501(c)(3) tax exempt status. I have been successful many times.
I even wrote a book, The IRS and Your Homeschool Organization, telling homeschool organizations how and why to become a 501(c)(3) organization.
Am I wrong? Or is Mr. Mechanic incorrect?
Neither. Or rather, it depends on how your organization is structured and your purpose. If your homeschool organization is a support group that is “made up of a group of parents who have joined together to work cooperatively to provide funds to pay for the participation of their children in athletic (or educational) events.” you do not qualify for 501(c)(3) tax exempt status. But you can qualify for a different IRS tax exempt status called 501(c)(7) Social Club status.
I am assisting a homeschool support group that has a few co-op classes, but their main purpose is to join together to support each other in homeschooling. They are applying for 501(c)(7) as a Social Club. They will receive many of the benefits of tax exempt status, but not quite the same a 501(c)(3) status.
What about your homeschool organization? Would you qualify as a 501(c)(3) charity or 501(c)(7) Social Club?
Do you know the difference?
How can you decide? It depends on your activities, purpose and structure.
I can help you sort out the differences.
Please contact me about a phone consultation to help you determine which status is best for your organization.
Do not make the mistake of choosing the wrong tax exempt status. You could be denied by the IRS like Mr Mechanic mentioned and waste a lot of time and money. It can happen to your group. Read a real life story here:
If you need help discerning the tax exempt status of your homeschool organization, send me an email at Carol@HomeschoolCPA.com. We can arrange a private consultation to discuss your particular situation.
Carol Topp, CPA