Individual Scout Accounts Part Trois

[boomerscout]

I get you. But if Council and District both say our fund-raising does not meet the personal benefit litmus test, who am I to argue? We asked for an official position and got one.

 

What would be really worthwhile is if National stood up and took a position on this and gave guidance.

Problem here is that Council is not legally responsible for you, your chartering organization is. They are the ones you should have asked if they don't mind you skirting the law

National has taken a position. It is in their "Product Sales Guide" (which is different from their "Product sales Manual).

 

[Pack18Alex]

Also, if you are doing a fundraiser where the scouts are using their labor and the tax free nature of the CO, but it's more clear the benefits, you're probably going to be clearer. I mean, if the "Philmont Patrol" of 6 boys run a Car Wash every other month, and raise $500 to cover their trip to Philmont, and it goes into the Troop Account and 100% goes to the Philmont trip, there is ZERO problem, right?

 

They are raising money, as a Scout group (even if it's an ad hoc patrol for this trip), for a Scouting trip?

 

As pointed out by qwazse, if the Scout is getting a really private benefit (scouts split the money after each carwash), at most you have to 1099 them if it's more than $600, and they aren't going to owe any taxes on it anyway.

 

Just think more in terms of Units and Unit goals, and sub-Units and sub-Unit goals, and less in terms of ISAs, and you'll be fine.

 

I have to remind my parents on the committee that our goal isn't "fairness" our goal is to advance the pack. We want incentives to encourage the behavior we want, but if the goal is getting Scouts camping, then our budget priorities need to be oriented on getting Scouts camping, not on allocating costs fairly.

 

Same thing with ISAs. You can't use the BSA product sales for primarily private benefits, which ISAs are. But you CAN use BSA product sales to fund the Scout Unit, and as long as the primary benefit is NOT the individual, you can use incentives to align them, and people can work to earn their own way.

 

Taking the fundraiser money, dumping it in an ISA, and charging dues/event fees out of the ISA is simply the lazy way to do it. You've made the fundraiser simply an individual scout money making opportunity, and that's not what the IRS permits us to all do as 501c3 organizations. Service for money is always permitted. Incentives based upon the interests of scouting are permitted.

 

This means some of the benefits are privatized (incentives), some are socialized (Unit/Council Cut), and some are in the middle (Patrol Accounts).

 

I find for both my scouts and my parents: Sell 150 and Event X is free is way more motivating than X% goes into a Scout Account and you save $12 off something or other.

 

Letting the Scout keep 80%-100% certainly gives them the most incentive, but if the Scout is out selling popcorn professionally for a sales commission, that's NOT a non-profit fundraiser, that's a sales job. Just align your incentives and rewards and everything works out.

 

I mean, there is NOTHING wrong with a Scout buying Popcorn for $7 and selling it for $10 to pay for his Scouting operation. However, that's no more Tax-exempt an activity than Walmart buying Popcorn and selling it with a mark-up. He can source his own supply (or you can arrange it), and he can pay the taxes on the profits. If you want to be tax exempt, the benefit has to be for the tax exempt organization.

[Gone]

Just to be clear, no one here actually knows for certain (e.g., is a tax lawyer) what is, is not allowed, right?

 

 

Point being, I see a bunch of opinions logdge here...which is great...but nothing that is a clear directive of what is/is not allowed under the law.

[BoyLedMyEye]

When a Scout leaves a Troop, does he receive a Troop written check as reimbursement for his ISA in the amount reflecting the total he earned for selling xx dollars of xx product during the Troop-wide fundraiser?

 

Does it matter whether he leaves voluntarily or involuntarily?

 

What is the correct, legal, and ETHICAL thing to do with such a check if it is received, unprompted, and is notated on the memo line as individual Scout fundraiser credit reimbursement?

 

[scoutergipper]

We do not allow Scouts leaving the Troop to take their account with them. The funds usually revert to the Troop general fund, although I can see a situation where a one brother "donates" his Scout Account balance to a younger brother, or donates it to a Scout in the Troop he knows is having financial difficulties.

 

If my son received the kind of check you describe, he would be likely to write one back to the unit for the same amount as a donation.

[boomerscout]

 

If my son received the kind of check you describe, he would be likely to write one back to the unit for the same amount as a donation.

it would be better just to hand back the original check. That way actual ISA money hasn't entered his checking account

 

[Stosh]

http://www.eidebailly.com/industries/non-profit/irs-highlights-private-benefit-concerns-in-use-of-fundraising-accounts/

 

http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Exemption-Requirements-Section-501%28c%29%283%29-Organizations

 

Remember, it's not the unit or the council holding the 501©(3), it's the chartering organization that will take the hit from the IRS.

 

Stosh

[Pack18Alex]

The only one who knows for certain is the judge in tax court hearing the case. Even the IRS isn't final. We're here trying to hash out solutions that seem to fit within the guidance the IRS has put out, the Forbes article - with decent advice, and BSA's new policies that aren't publicized.

 

Quick point on this, there are two questions here:

1. What is the "right thing to do"?

2. What is the practical reality?

 

The reason that these both matter is that as Scout Leaders, and trustworthy, we have to stay within the letter and spirit of the law (#1). We also have to protect our Charter Org from the IRS (#2).

 

I have no idea what the IRS would say regarding my structure (#2), but I think that the likelihood that they would swoop in, audit the Synagogue, and fight the Synagogues 501c3 because they think my incentives were slightly too large pretty close to 0, so I'm okay. However, I still need to met #1, am I staying within the IRS/BSA guidelines.

 

As a result of this discussion, I'm revisiting how I'm going to structure my popcorn "sales requirements" for the Pack to cover your attendance. I think we can keep the numbers manageable for parents to not get scared, and let the boys "earn their way", while keeping the incentives in line with normal non-profit operations, and in the "de minims" and "recognition" realm.

 

Thanks to everyone for the help here.

 

At our troop level, none of the parents care about costs, whether they pay $30, $35, or $50 for a camp out, they don't care. At our pack level, $15/person vs $35/person is $100/family, that matters.

[qwazse]

Just to be clear' date=' no one here actually knows for certain (e.g., is a tax lawyer) what is, is not allowed, right?[/quote']

 

Our RT commish said he talked to tax people and other lawyers, so I've been trying to relay the thinking that he learned. Nobody said troops with ISA's of the magnitude we're talking would be of any concern.

 

Problem with tax rulings: they allow "wiggle room." But, on this end it sounds like we're playing a big game of "hot potato"!

 

[Gone]

 

Our RT commish said he talked to tax people and other lawyers, so I've been trying to relay the thinking that he learned. Nobody said troops with ISA's of the magnitude we're talking would be of any concern.

 

Problem with tax rulings: they allow "wiggle room." But, on this end it sounds like we're playing a big game of "hot potato"!

 

Oddly enough I have heard the same thing, from a similar source with a very different answer.

 

Funny how that works.

[jc2008]

I just don't even understand how anyone can even define a Scout Account. I mean we set money aside for use by the boys based on their fundraiser participation and success. That money is not "theirs" to keep, but if they need something we will buy it for them or reimburse them if they buy it out of their own pocket.

 

I mean instead of calling it a Scout Account (which is what we do call it because of ease of explanation) I could just say that I am the treasurer and if you need to pay for something ask me and I will decide if the pack will pay or not (basing it on those fundraiser numbers and how much money the boy brought in that i know about). But at the end of the day it wouldn't be an ISA, but just a random decision of mine if we paid for it or not.

 

I really don't see how the IRS could tell the difference ? After all the scout account stuff is one page in my spreadsheet which doesnt need to be there for my bank account and records to be correct.

 

 

 

[Stosh]

I just don't even understand how anyone can even define a Scout Account. I mean we set money aside for use by the boys based on their fundraiser participation and success. That money is not "theirs" to keep, but if they need something we will buy it for them or reimburse them if they buy it out of their own pocket.

 

I mean instead of calling it a Scout Account (which is what we do call it because of ease of explanation) I could just say that I am the treasurer and if you need to pay for something ask me and I will decide if the pack will pay or not (basing it on those fundraiser numbers and how much money the boy brought in that i know about). But at the end of the day it wouldn't be an ISA, but just a random decision of mine if we paid for it or not.

 

I really don't see how the IRS could tell the difference ? After all the scout account stuff is one page in my spreadsheet which doesnt need to be there for my bank account and records to be correct.

 

 

 

Gotta love the "Second Set of Books" accounting system going on here. It still sounds like the boys get paid for participating in fundraising and thus a 1099 is in order.

 

Stosh

[qwazse]

.... instead of calling it a Scout Account (which is what we do call it because of ease of explanation) I could just.... basing it on those fundraiser numbers and how much money the boy brought in that i know about. ... I really don't see how the IRS could tell the difference ? After all the scout account stuff is one page in my spreadsheet which doesnt need to be there for my bank account and records to be correct.

 

A rose by any other name ...

 

No matter what you call it, you are accounting for individuals' fundraising and crediting their access to pack funds in proportion to what they've raised. The only question is: does that accounting exist for the boy's parents' personal benefit, or does it enable the boy stewards over some pack funds for the pack's benefit?

 

[Gone]

Well, an update. Our unit found a tax lawyer who is a Boy Scout leader and spent 20 years as an IRS auditor. He's helping the unit to set up our fund raising program and literature to stay compliant with this new development. According to him, we can still keep out account system, boys can still raise funds for their own purpose....all with only minor modifications to our process, sales pitch and documentation. And he's doing it all pro bono. So if a small unit in the western US can do that, why can't BSA?

[koolaidman]

mozartbrau: Tread carefully. Watch the sales pitch. Per BSA guidelines it needs to go a certain way, which may be at odds with the legalese devised by the scout lawyer. review for substance over form.