Fellow CPA Peter Reilly, a journalist at Forbes.com, emailed me about a recent court case involving individual fundraising accounts (IFAs).
IFAs are when you share or distribute your fundraising proceeds among the families who raised the money.
IFAs are illegal and a booster club recently lost a Tax Court case and their tax exempt status for using IFAs.
Read Peter’s blog post on the court case. It’s a very good summary (I read the entire court case!)
Here’s the bottom line:
Do NOT set up individual fundraising accounts.
If you have them now, STOP!
If you conduct fundraising, do not record how much each family brought in.
Do not have a system where tuition or dues are reduced by the amount of fundraising a family conducts.
All fundraising proceeds should go into your general fund to be used for the common expenses of the group.
We’re all in this together folks!
Carol Topp, CPA