Follow
If your Troop, Pack, or Crew assigns proceeds from fundraising to individual Scout accounts you may have been taken aback by this statement in the Fiscal Policies And Procedures For BSA Units FAQ I shared last week
Can my unit credit amounts from fundraising to an individual toward their expenses?
No. The IRS has stated that crediting fundraising amounts constitutes private benefit. However, the unit could use the funds (all or a percentage) raised to reduce or eliminate dues and various registration fees, purchase uniforms and Scouting books, and purchase camping equipment. The unit could also use its funds to provide assistance to individual Scouts in cases of financial hardship.
I did a little digging and here’s what I have learned (thanks to reader Michael Voelker who’s comments helped clarify the issue).
At the heart of the matter is the simple question: can funds raised by charitable organizations be earmarked for individuals? The short answer is no (at least for now).
I did contact my local Council for advice, they directed me to the Fiscal Policies document, and said that was the official statement on the matter, you will not find any additional verbiage on the matter. I caution you that you may find information that predates the fiscal policies FAQ, to my knowledge it is the most recent expression of policy and supersedes all others.
Of course we want our Scouts to earn their way and we have traditionally done this by earmarking a percentage of the funds they raise to individual accounts. The upshot of the issue is that the practice of using a charitable status to raise funds that are earmarked for individual use is, arguably, against the spirit and intention of the charitable status.
So what to do? Should we eliminate the practice of earmarking funds into individual youth accounts? The answer (after reading many pages of tax documents) is complex and there is no ‘bright line’ determining when private benefit has been provided.
The determination seems to rest (at least in part) on exactly how much of an individuals private financial obligations can be offset by raising funds under a charitable status. There is no question that fundraising proceeds may be used to provide all members an equal benefit (reduce or eliminate dues and various registration fees, purchase uniforms and Scouting books, and purchase camping equipment.) Organizations that have used their charitable status to offset significant private, individual financial obligations through a system of individual accounts have had their charitable status challenged. Organizations that offset a relatively small amount of individual financial obligaions through a system of individual accounts have not.
It should go without saying that I am offering my own read of the situation, based on what I have researched. This should not be misconstrued an expert or particularly informed opinion, but as an introduction to a question better answered by others. The present policy echos the most restrictive interpretation of tax law: “crediting fundraising amounts constitutes private benefit.”
My advice, as always; follow the policy.
