IRS asks if homeschool groups gives scholarships

I am helping my homeschool co-op apply for 501c3 tax exempt status with the IRS.On the application form (Form 1023), the IRS asks about scholarships. We provide scholarships for our members that cannot pay their $30 membership fee.  Should we check “yes”?
Tricia from TX

Tricia,

The IRS is asking about “real” scholarships like the kind a high school graduate is given to go to college.

What your group offers is a fee discount, specifically a benevolent discount to a needy family. I find that co-ops frequently call these fee discounts “scholarships.” That is the wrong word to use when dealing with the IRS.

I wish I could wave a magic wand and get homeschool groups to stop calling a fee discount a “scholarship.” But I’ve been trying for about 15 years with no success!

I recommend that you change your wording in your co-op and especially change the word on your application to the IRS.

I think you should check the box NO. Your homeschool group does not provide scholarships as the IRS is using the word. Your group gives a benevolent discount.

By the way, your discount of $30 seems insignificant and it’s for benevolence.

But some homeschool groups give rather large discounts to super volunteers, teachers, board members, etc. One homeschool group was giving a board member $4,000 in discounts every year!  These large discounts may be taxable income to the volunteer or paid worker!


I recommend you get a copy of Paying Workers in a Homeschool Organization to help you stay legal and compliant with compensation reporting.


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

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