Carol,Our homeschool coop’s sports team decided to do a fundraiser using Scrips. The group is going to make each individual player buy their uniform instead of renting it from the team. So last August, the co-op started individual family accounts using money made from Scrips to be able to be applied toward buying individual uniforms.According to some of the information I just read on your website (https://homeschoolcpa.com/do-not-use-individual-fund-raising-accounts/), I am concerned that this violates the rules for 501 c(7) non-profit social groups.Am I understanding it correctly that allowing individual athletes to fund raise using Scrips to offset individual uniform cost is not allowed for 501 c(7) non-profits? Is this truly is an improper use of fundraising proceeds?Thank you so much,Elizabeth
Elizabeth,
You are correct that usually individual fundraising accounts are prohibited for 501c tax exempt organizations as I wrote about here and here.
But Scrip is an exception to the “No individual fundraiser accounts” rule.
Great Lakes Scrip requested a private letter ruling from the IRS in 2009 stating that their program does not create income to the parent or inurement because they are rebates and not payment for services. BTW, these IRS private letter rulings cost thousands of dollars.
The IRS letter is 9 pages long and probably more than you care to read. Fortunately, Great Lakes Scrip provides a a nice, plain-English summary of the tax implications from using their scrip program.
“we want to reassure you that crediting your members’ scrip rebates toward their tuition or other fees has been reviewed and approved by the IRS, if you have structured your program correctly.” -Great Lakes Scrip
Regular scrip often results in a nonprofit handling a good deal more money than it ever has previously. For example, an all-volunteer group may be used to handling hundreds of dollars, but with scrip they may be handling tens of thousands of dollars in a short period of time. Doing so requires conscientious volunteers who have strong ability to manage funds carefully, promptly, and ethically.
Helping homeschool leaders with legal and tax compliance
