This post was originally published on Forbes Feb 25, 2015Love Those Thin Mints
Remember, once something becomes the property of the troop, it is now a “Girl Scout item” and should be kept with the troop things. It does not belong to individual girls or parents/guardians. Troop money should be used to equally benefit the troop as a whole, not individuals. Keeping records to show how much each girl or family earns or contributes is not appropriate. Girls should be taught that they all must do their best to help the troop earn enough money to do what they want to do.
Girls should not be singled out for praise or blame for how much money they earn for the troop. Not all girls will perform or achieve equally. If a girl’s parents/guardians do not give her permission to participate in every money‐earning opportunity, whether due to illness or other personal circumstances, the girl should not be penalized.
Parents sell things such as steak, cookbooks, soup and coupon books to friends, family, neighbors and coworkers.
The money that each family raises by participating in your fundraising events is "earmarked for that family and goes towards their child's competition fees." Your "goal is to help alleviate some of the financial burden it costs to compete at these events." Families that do not participate in the fundraisers are "responsible to pay for the portion of their child's competition and coaches fees." As you explain:
We facilitate the fundraisers and the parents participate in these fundraisers we put on for them to help raise money for their children to compete, we keep track of their fundraising for them and the money goes towards their children's competition and coaching fees.
The court in Capital Gymnastics Booster Club v. Comm., T.C. Memo 2013-193, analyzed the fundraising activity of a gymnastic booster club. Parent-members sold items and were awarded points in proportion to the profit that the family generated. Each point was valued at $10, and used to offset the family's assessed costs of competition for their children. Parents who did not fundraise did not receive a benefit from the activity, they were responsible for writing a check to the organization for the full assessment for their children. The court held that the fundraising structure allowed assets of the organization to inure to the members who control the organization.
Your purpose is to assist your members fulfill a financial obligation for their children. Fundraising is your primary activity. You "facilitate" and "put on fundraisers" and the majority of your budget is spent on fundraising. Evidently you are using your funds, your time, and your exempt status to provide fundraising opportunities for your parents. However, the money that they make in your name does not go into your general budget. Rather, you keep an accounting of how much revenue each member brings in and permit each member to apply that revenue to the cost of athletic competitions for their children. Members who do not fundraise pay the cost of competitions from their own funds. You do not provide scholarships to any family. You do not jointly fundraise for the organization and then allocate to all equally or based on need or merit.
The benefit from the fundraising activity is allocated in direct proportion to the participation of the family.
In addition to the benefit to all your fundraising members, you provide a special benefit to the director who owns the gymnasium where all of the children of your members take lessons and compete. An exempt organization may not operate to direct funds, business, or other benefits to a commercial entity. P.L.L.
Scholarship v. Commissioner, (events to raise funds for scholarships benefit affiliated bar), 82 T.C, Church by Mail (owners of printing and mailing service benefited from business directed to it from church they also controlled) The fact that all of the money that you raise enables athletes to compete on teams sponsored by the gym is a substantial private benefit. You also referred to using 25% of the membership fee to "be used towards upkeep of equipment they use for competing each year." It is not clear whether you were referring to equipment owned by the Gym. If so, it would be additional inurement to a director and benefit to a commercial entity.
Because you significantly benefit your members rather than operating exclusively for exempt purposes, we cannot recognize you as exempt under §501(c)(3).