I love knowing that most homeschool groups are generous, especially toward families in financial need. They deliver meals, take up collections, and waive fees for a needy family.
But should a homeschool group serve as a charity?
Maybe, but maybe not.
Here’s a true story..
A homeschool group was given $5,000 with the specific purpose of gifting to members in the group that were experiencing difficult financial times. They told me, “Our instructions from the donor was to gift it to members that were going through difficult financial times due to unemployment or illness.”
It was very nice of the donor and the organization to have a concern for the afflicted families in their program.
But this homeschool group has 501(c)(3) status as a religious and educational organization. There is no mention of “charitable” purpose in their founding documents (their Articles of Incorporation), or in their tax exempt application with the IRS.
Basically, they were not given tax exempt status to be collecting and distributing funds to needy people (i.e. charity).
Here’s part of what I wrote to them:
In general, your homeschool organization should not serve as a charitable conduit for someone to make a gift to a needy family (or families). The reason is because your 501(c)(3) status was for educational purposes, not charitable to help needy families with financial needs. Additionally, the donor used your homeschool organization to get a tax deductible donation, when he or she should have given the money as a gift (i.e. not tax deductible) to the needy families.
If you told me that you used the $5,000 to start a benevolent fund and reduced the tuition for several families, I’d say the IRS may approve that use of the money. Your homeschool organization is not a “charity” and should not be used to funnel money to a needy family, nor should you let your 501(c)(3) status be used to give a donor a tax deduction for what is a gift to an individual(s).
You were given tax exempt status for specific purposes. Stick to the purposes you told the IRS: educational and religious.
Now, I’m a religious person (a Christian, to be exact), so to me being generous and helping the needy is related my religious beliefs and this homeschool group may argue the same. But they should have been more clear in their explanation to the IRS and their organizing documents.
My advice to them is to:
- Not accept donations that are ear marked for helping the financial needs of a family. Direct the donor to other charitable organizations.
- Not give cash or checks to a needy family, but instead offer tuition discounts on their program to keep in line with their educational purposes.
- Not let your homeschool organization be used as a conduit for financial transactions that are outside of your exempt purpose.
All homeschool leaders should pull out their founding documents (their Articles of Incorporation and bylaws) and their tax exempt application with the IRS (Form 1023 or 1023-EZ) to refresh their memory on their organization’s stated purpose.
Then stick to that purpose.
The Homeschool Organization Board Manual will help you keep your important documents in a binder for easy access.
Your board may wish to create a donation acceptance policy and include the 3 points above.
Carol Topp, CPA
HomeschoolCPA.com
