My homeschool group does several fund raisers where we divide the proceeds to each family to reduce the parents’ tuition. We have a shoppers reward program and I track how much of a tuition credit each parent earns by using their shoppers reward card. We also let students or parents work off some tuition by volunteering to work a shift at our city’s major league baseball stadium concessions. The team makes a donation to our homeschool group (a 501c3 organization). I’m having a hard time finding information on the IRS website about these types of fund raisers.
Susan in Ohio (paraphrase from a spoken conversation)
I’m sorry you found it so difficult to find information about fundraisers like your group is running. Sometimes you have to know the correct language to use in a search.
IRS Guidance on cooperative fundraising
The IRS does have a document titled Athletic Booster Clubs: Are They Exempt? written n 1993. I’ve read this document several times. It is a document that the IRS uses to train their employees. While it addresses athletic booster clubs, the principles apply to school booster clubs and homeschool groups that do fund raising.
Here is a white paper by Sandra Pfau Englund, an attorney with Renosi Law, P.A. www.nonprofitlaw.com where she explains the IRS’s 14 page document.
Her conclusion on what the IRS calls cooperative fundraising (fundraising activities in which individuals receive credit for funds raised) are pretty serious:
The following key conclusions are made based on a review of the federal law and the limited IRS writings regardinghttps://parentbooster.org/resources/documents/cooperative%20fundraising%20activities%20white%20paper.pdf
cooperative fundraising and IFAs:
1. The IRS has found that engaging in cooperative fundraising activities using of individual fundraising accounts
(IFAs) may disqualify an organization for federal tax?exempt status under section 501(c)(3);
2. Cooperative fundraising activities are not strictly prohibited under federal law and IRS rules, and the IRS’
analysis and arguments are not convincing;. however,
3. If booster clubs engage in cooperative fundraising activities it is recommended that such activities make up only
an insubstantial amount of the booster clubs overall activities.
Ms Pfau Englund also founded an organization called ParentBoosterUSA. Her blog post on Athletic Booster Clubs Face Intense Scrutiny: 5 Tips to Keep Out of the Penalty Box is worth reading.
Your question about fund raising by working concessions at MLB games is also considered cooperative fundraising if you give credit to the participating families and therefore strongly discouraged by the IRS and most nonprofit experts.
I agree with ParentBoosterUSA, if you are using cooperative fundraising and giving credits or divide the proceeds among the participating families: STOP. Now. Use fundraisers to support the entire homeschool organization. Focus on paying for events or equipment that the entire group uses. Do not “credit” fundraiser proceeds to individuals or families based on the amount of funds raised or volunteer hours worked.
Carol Topp, CPA
Helping Homeschool Leaders