The scouts percentage of popcorn /fundraising sales

[ScoutNut]

"A scout could also buy a uniform shirt and sell it for cash."

 

I, personally, don't recommend using Scout Accounts for uniforms or handbooks either. There are other ways to get uniforms. Scout Shops often have deep discounts on closeout uniforms, and also often have sales on uniform packages at the beginning of the school year. Ebay, yard sales, Salvation Army stores, etc, all are places to get uniforms for dirt cheap. Then there are unit, or District, Uniform Closets. If you want to make sure ALL of the Scouts in your unit have access to a uniform creating a unit uniform closet is the way to go. My unit includes the cost of Handbooks in our annual budget, and provides them to ALL of our Scouts at no cost to the Scout.

 

 

"He could take his council prize for selling alot of popcorn and sell it for cash."

 

An incentive sales prize from the council is different from a BSA unit, using unit funds to purchase a Scout personal gear. The IRS might see purchasing personal gear as violating your charter's not-for-profit status. Is that a chance you really want to take?

 

 

"He could use his scout account, go to camp and do absolutrely nothing to do with scouting..which would then make it a simple, plain personal camping excursion."

 

He is still at a Scouting event, in a Scout camp, with other Scouts, where Scouting activities are going on around him. A "personal camping excursion" would be, well, personal, and nothing in it would be related to Scouting.

 

 

"He coukld agree to transfeer $200.00 of scout account assets to another scout for $85.00 cash if he wanted to."

 

He could agree to anything he wished, but since your Charter Organization OWNS your unit, Scout Accounts are part of the UNIT'S funds, and are managed by BSA ADULT VOLUNTEERS, if your CO, and Pack went along with that kind of scheme then it would deserve to loose it's charter and have all of the volunteers involved loose their BSA memberships as well.

 

 

"He went to camp on other people's dime. Other people paid fior him to go to camp. They did not go to campm themselves, the scout did not pull monmey from his own wallet..other people pay for it. And it is the scouts gain."

 

Again, Scout Camp is part of the Scouting program, which is a method for achieving the aims and purposes of Scouting. Also, if someone donated money specifically earmarked to be used for sending one, or more boys, to Scout Camp, then sending Scouts to camp is using the money in the way it's donor expected.

 

 

"SCout goes to summer camp, gets a tshirt or patch which he could also sell."

 

The t-shirt and patch are included in the cost of the camp, and as such are part of the Scouting program provided at/by the camp. If the Scout decides to sell his camp t-shirt, patch, and all handicrafts he made while at camp, that is his parents call.

 

 

"Now, if it is a weekend camp, and he or his parents cannot afford to buy a tent, or sleeping bag, or other needed equipment..what does he do?"

 

His parents talk to their Cubmaster, and/or their Committee Chair to see if some equipment can be borrowed from someone in the Pack, or from a local Boy Scout Troop. Equipment can usually be found if they just ask. Sleeping bags can be done without if need be. Especially in summer, all that is needed is a pillow and a few blankets, and most folks have those available.

 

 

"And if we want to be technical, any money the scout gets is a personal gain."

 

Not necessarily. The money still belongs to the Scout unit, and it's Charter Organization. If it is used for Scouting purposes it can work. However, if your Pack gives it's Scouts cash for any reason, or purchases a Scout personal gear, that is when it gets iffy.

 

My opinion, but personally, I would rather play it safe, and not mess with possible IRS problems.

[Scoutfish]

Here is what I am saying:

 

First, I am going to trust the scout will use it for scouting and the scouting experience..unless they give me a reason to do so otherwise.

 

Secondly, when any scout joins scouting - everything he gets out of it is for personal gain. When he goes camping, the scout goes camping, not his neighborhood or anybody else. Just him,. He gained by having that adventure. He gained by having thet experience.

 

Technically, you could change your sales pitch to say: "Buy popcorn so you pay for this scout go to camp and have fun without the scout having paying for it himself."

 

Personal gain if you want to get technical.So why do we see thsi as different? Because maybe while being part of the program, the entire community or even the nation gains something in the way of community service, Good Turn for America, LNT, Scouting for food, whatever other good deeds and service projects you can think of from Tiger Age to Eagle Scout projets.

 

So maybe a scout cannot afford a tent AND a sleeping bag AND the camping fee AND the uniform AND etc...

 

And yes, we had 3 of those scouts last year. One used his scout account to help pay for everything he has..and he is sticking in the program because he loves it. Single mom, never knew his dad, mom works all kinds of hours to get ahead. The pack provided the uniform, and everything that goes with it . We also handle the recharter fees too.

 

Could he borrow from somebody? WEll, not when they are camping that same wekend too since they are using that equipment.

 

Secondhand shops and thrift stores? Nah. I go in them to see what they have sometimes and I have never seen ant scout uniforms. I haven't even seen anything non uniform that could even be close.

 

Things just might be completely different whetre I live.

 

Point is, you could tear the entire popcorn trhing aprt if you wanted. Parents pretty do most of the work selling popcor with most scouts. But that does not mean all scouts. So maybe scouts in your area might use scout accounts to buty backpacks and then sell them for cash...but it doesn't mean mine will.

 

Now as for personal gain, even the Trail's End sales form gives you a amazon card or walmart card with cash values of $20.00 and $50.00. Our council will give you a $50.00 WalMart gift card for being top seller of the unit() and selling at least "X" amount of popcorn.

 

That's straight profit sharing , no?

 

WE use scout account for scout related stuff. We do not use it for WalMart or Amazon.

 

But you also have to look at this: Our best selling scouit ":might" sell $600.00 with mom or dads help, but we usualluy see sales in the neighborhood of $50.00 .

 

For $50.00 in sales , the scout isn't going to have much of a fleecing operation.

 

 

[Scoutfish]

As an aside, we do keep extensive records of who earns what, what they spend it on, etc.

 

For example, if scout Billy uses his scout account money for camp, uniform, scoutbook, tent (from scout shop) we keep records of what, when, and how much.

 

We never actually hand any money to the scouts, we just allow them to use money from their accounts at the scout shop. But we have to have the treasurer and CC or CM authorize it.

 

 

[kari_cardi]

Why not allocate the same amount of money toward building your pack resources then? The pack can buy and own tents, sleeping bags, and uniforms to lend to any scout in need. And the pack can contribute a portion of summer camp fees to any scout who wants to attend. Your goal is met and you avoid any hint of impropriety by making the supplies/funds available to anyone in the pack, even if only a few take advantage of it.

[boomerscout]

Question

I am involved with a Boy Scout Troop that is chartered by a Church that is a 501©(3, making use also responsible to follow the Tax Laws of a 501©(3). Our only Fundraiser is selling Christmas Trees every year. The Scouts work with a parent at the Tree Lot and the profits are distributed into Individual Scout Accounts based on the number of hours that a Scout and his Parent works. We understand that this practice may not be legal with the IRS.

Suggestions have been to only put the Scouts portion into his individual Scout Account and the Parents portion into the Troops General Fund.

The other suggestion that was given by a CPA who "suggested having the Scout submit an application for receiving his money by justifying what it is and how its related to Scouting".

Is our current practice of Individual Scout Accounts legal with the IRS and would either of these two suggestions be legal with the IRS?

Do you know of any method that we can use to distribute the funds based on the hours that each Scout works that would be legal with the IRS?

Thank you very much for your time in addressing our issues.

Answer

The IRS may have a problem with a 501©(3) organization allowing individuals to collect funds to go for their own, private

benefit. See

www.irs.gov/pub/irs-wd/02-0041.pdf on the top of page 2 about

Scouts collecting for their own use. "Earmarked accounts may not

be compatible with continued tax exemption." The IRS then cites

to www.irs.gov/pub/irs-tege/eotopica93.pdf (Example one on page 5),

where they determined that the resulting "private benefit to the

individual members was substantial and negated the charitable

intent of the organization precluding exemption under section

501©(3) of the Code".

 

Also see:

http://viewer.zoho.com/docs/tabZa1

That article also warns that all funds solicited on behalf of the

booster organization in fundraisers (sales) must go into the

general fund of the booster organization and not directly into

individual accounts of the booster fundraiser. I agree with that

warning.

 

See starting at the bottom of page 2 of

www.irs.gov/pub/irs-wd/02-0041.pdf

"You have asked whether issuing a Form 1099 for each Scout

receiving such benefits would negate the private benefit

question. In this case, you would treat all income the Scout

receives through the earmarked account as compensation for tax

purposes. An exempt organization can, of course, pay reasonable

compensation for services. Treating the receipts as income to

the individual, however, may raise additional issues for the

Pack. In particular, the fundraising activity may, if conducted

by paid labor rather than volunteers, be characterized as

unrelated business income taxable under section 511 of the Code.

You may wish, therefore, to consider whether creating a possible

tax liability for both the individual Scouts and the Pack is

appropriate under the circumstances."

 

Therefore, your present practice is not in compliance with IRS rulings and none of your suggestions are valid. If you treat the one day activity as normal work for benefits (taxable to the individual working) then you would have no problem with the IRS.

 

 

[boomerscout]

(I don't know which council this is)

To: Unit Leaders

Re: Unit Scout Accounts

We have received word today on the first, of what we expect to be several, IRS

rulings that impact unit finances.

Many units give Scouts a percentage of the profit of unit fundraisers. Normally

the unit holds those funds in their checking account reserved for each Scout.

The IRS has ruled that Scouts receiving a percentage of any fundraiser is a

commission and as such is taxable income.

For over a year, the Boy Scouts of America, National Council has been studying

the issue of private benefit. In essence, when a non-profit organization raises

funds, either through contributions, or the sale of a product or service, the

assumption is that the proceeds go to further the public good.

The issue comes into play when incentive programs happen at the unit level for

individual Scouts. If a unit establishes an account for a member based solely on

the quantity of items sold, that reward might be seen as a private benefit to the

individual. If this benefit is of sufficient size, it may require reporting of this benefit

as income to the individual, as well as to call into question the non-profit status of

the Council and the Boy Scouts of America. These funds are clearly not for the

public good, but directly benefit an individual.

Therefore, we recommend the following:

o Make sure that any sale of materials, instructions, and support information

do not make reference to individual Scouts earning money for their

individual participation in Scouting activities. Fundraising for group

participation is, however, acceptable.

o Units who wish to continue to offer boy account type plans need to

develop fund distribution plans that include criteria other than the sale of

items. These might include:

Participation

Leadership

Scout spirit

Advancement

A portion of the unit proceeds from any sale or activity should be set aside for

general unit expenses, and could include funds used for assistance to members

with financial needs.

[boomerscout]

You have asked whether issuing a Form 1099 for each Scout

receiving such benefits would negate the private benefit question.

In this case, you would treat all income the Scout receives through

the earmarked account as compensation for tax purposes. An exempt

organization can, of course, pay reasonable compensation for

services. Treating the receipts as income to the individual,

however, may raise additional issues for the Pack. In particular,

the fundraising activity may, if conducted by paid labor rather

than volunteers, be characterized as unrelated business income

taxable under section 511 of the Code. You may wish, therefore, to

consider whether creating a possible tax liability for both the

individual Scouts and the Pack is appropriate under the

circumstances.

---End of Excerpt--

www.irs.gov/pub/irs-wd/02-0041.pdf at the bottom of page 2

 

Harvey Mechanic, Attorney at Law -

Harvey108@hotmail.com

 

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So, I'm not certain if we should generate a 1099 or a W-2 for each Scout having an individual account. If a W-2, we also need to pay Social Security on it; not sure about sending in the unemployment compensation premium.

The personal experience of going camping is supposedly priceless

[Scoutfish]

Okay, myself and the CC and ACm had a pre meeting- meeting. This was to discuss exactly what to do with sales from the chicken dinner, popcorn, and camp cards.

 

We decided that donation made during chicken ticket sales would go into a seperate slush fund to be used if and when the pack falls short of money for pack camping, crossover ceremoiy supplies, or to fund camperships.

 

Popcorn, we will split the units 30% share into three shares of 70% fr scout account, 20% for den , and 10% for pack. That ten percent won't be much, but is more out of principle than practicallity. Show the scout he is helping te pack.

 

The $2.50 our pack gets from camp cards will be divided as follows $1.50 for scout account, %0.50 for den and $0.50 for pack.

 

Pretty much the biggest intake for the pack is the chicken dinner, and the biggest intake for the scout account will be camp cards.

 

Popcorn is so little an amount that it won't make any signifigant differenace if we used it to light a campfire.

 

 

[Scoutfish]

So...I remember from Long ago and far, far away that if you weren't taxed on te first $600.00 in income.

 

Worked for a guy over the summer who would either cut you off when you reached $600.00 or you claimed half your hours and worked the other half under the table so that it took twice as long to reach your $600.00 > Well, at least on paper.

 

Granted, this was back in 1989. No doubt that the IRS has added about 23,475 new laws since then, but is this even close anymore?

 

[83Eagle]

This whole 1099 stuff associated with fundraising "commission" makes no sense.

 

In the official BSA program, If you sell $650 in popcorn, you get a $30 gift card, along with a disk shooter toy that has at least some monetary value. That gift card is for walmart or amazon.com, so it's pretty much the same as cash. Doesn't relate at ALL to scouting program expenses. Is the council going to start issuing 1099s to these boys for commissions paid?

 

So tell me how this is any different from a unit rewarding boys in accordance with the different amounts of sales they bring in, when this reward is made at the time of the fundraiser and directly tied to their efforts?

 

It isn't.

 

Now I understand the IRS might like to say so and that is it's own issue. But the practice is precisely the same: rewarding boys who bring in more funds to the unit, which benefits the unit as a whole.

[boomerscout]

Paying your Scouts by putting money into their individual accounts seems to be income according to the few IRS pubs I looked at. While I doubt they will ever make enough to file, since it is income they are responsible for sending in their portion of social security & medicare.

As long as they are independent contractors a 1099 should suffice. If they are required to be on duty at a specific time, and work to your methods instead of theirs, they might be considered employees where the unit needs to be paying unemployment insurance.

On the other hand, motivational prizes do not seem to be any problem - especially if announced ahead of time. You could announce that the top 100 "salesmen" would get a certificate good for $15 at the Scout Shop.

Also, if a destitute Scout needs a pair of, say, Scout socks, it is perfectly OK for the unit to buy him a pair of socks out of the general funds. The only problem there, I perceive, is that Bobby's Mother may step forward to say, "Jimmy got a pair of socks for free, my Bobby needs some, too." And Mike, and Steve, and Paul, and Jerry, and Ralph, etc

I am not in the legal profession

[83Eagle]

Yeah, I understand the guidance, boomer, but it doesn't make any sense. Then again we are dealing with a government bureacracy so it doesn't need to make sense.

 

By their logic, our council should start issuing 1099s to all the boys who earned gift cards from WalMart for selling popcorn. After all, that's a lot more like cash than an individual scout account. The boy can spend the gift card on anything he wants versus being limited to program expenses.

 

From an ethical standpoint I see no difference between saying:

 

"If you sell X amount of popcorn, you get $X in gift cards as an incentive to sell more popcorn, which brings in more money to our program,"

 

and

 

"If you sell X amount of popcorn, you get $X in credit in your scout account as an incentive to sell more popcorn, which brings in more money to our program."

 

No difference whatsoever, IMO.

[83Eagle]

I just pulled out the trails end incentive flyer again.

 

If a scout sells $2,500 of popcorn, he gets $200 in wal mart cards--nearly 10% payback. PLUS 6% of his total sales each year is invested in his own scholarship account.

 

So...someone tell me how this is any different? I am not being argumentative here, I just really can't wrap my head around how the official BSA program can pay boys a significant amount that can be used for purposes completely outside scouting, but a unit doing that runs into problems. Do boys get issued 1099s for multi-hundred dollar gift cards and scholarships?

[Beavah]

Yah, it's funny. To me, workin' in da fields I do, what really doesn't make sense is people thinkin' they can work a NFP fundraiser in order to reduce their personal fees for anything. Whether that's camping or uniforms or gear. Da "big" COs who have people who knownwhat they're doin' prohibit this any time they get wind of it.

 

Put more simply, why should we be allowed to host a chicken dinner and compete against all da restaurants in the area who have to pay taxes, and pay withholding, if all we're doing is logging the same sort of personal profit in the form of goods and services we want? The reason we are exempted, and da reason we get donations, is because we are meant to be a community service.

 

So to my mind, da issue isn't so much the civil law, although I think if yeh ask anyone for an official legal opinion I'd know what they would say . It's an issue of the Scout Law and Oath. Yeh can't go into the community and compete on special terms with folks making a living, and yeh can't solicit and accept charitable donations, if in practice what you're really doing is putting money into your own pocket (aka "account"). That's what we call "panhandling" eh? Or fundraising fraud, or tax evasion. But by any name, it really shouldn't be an OK thing for scouts.

 

Beavah

 

[boomerscout]

I believe scholarships are a tax-free award, and are not considered income.

 

Not sure about the gift cards. I do know that when people win very large contest prizes, the IRS is happy to visit them. Maybe they look the other way because Scouting is perceived as a good thing. For now.

 

Since we are selling a manufactured product, Trail's End, and not something we make ourselves, such as a bake sale, are we supposed to have been collecting sales tax?