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Can a scout control use of raised funds?

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When scouts are out fund raising, isn't the money ALL turned in to the scout unit (or at least local council)?

Does a scout have ANY say over how raised funds are used?   

Is there any circumstance in which a scout could direct some of the money to an entity OTHER than his unit or council?

I ask because, according to the article in the link below, a scout raised $15K by selling popcorn, and then used a portion of the money to help a senior center that assists dementia patients.

That actually sounds to me like a worthwhile cause that a community would want to cheer for....BUT if a scout is out raising money for scouts, how on earth does ANYBODY defend channeling a portion to another charity (regardless of its mission)?

Article:
https://www.kxly.com/post-falls-boy-scout-sells-15k-worth-of-popcorn-uses-portion-of-money-to-help-local-nursing-home/ 

 

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I believe all the money collected should go to the troop and then the Troop could decide to donate a portion to the senior center as a service project.  The individual scout should not make that decision.  It would open a can of worms if the scout wanted to donate to a cause not supported by the majority of the troop or the BSA.

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If, as in very likely a majority of units, the individual scout is credited for his contribution in some manner, usually a limited use account of some kind, then he likely should have such an option.  Most of these accounts have restrictions on them as to what they can actually spend the funds on; it is mostly administrative fees, camping, uniforming.  It generally is not allowed to use it for simple frivolous personal items or entertainment.  Kind of another fine line, since it is not a personal use.  But it does belong to the unit, not the scout.  In our unit, if they leave, normally any funds left in an account returns to the unit directly, though it might, with proper management, follow him to another unit, paid to that unit, not the scout or his family.  

 

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Short answer is NO.  If the Scout sold Popcorn for his unit, all the proceeds go to the Unit. The unit, in it's wisdom, can allocate an appropriate portion to the Scout in the form of a "Scout Account" that may ONLY be used for Scout things.  If the Scout raised the money for "Scout " support, he/she cannot send the money off to another entity no matter how worthy. It's got to be used for Scouty things, not personal things, not charitable things.

 The BSA has been all over this, the IRS has been all over this.  The local Council should (if they have not been apprised of it already) should take this up and see what's what.   As happens sometime, the news may not have the correct facts, only the slightly garbled ones.

It also raises the "Not as a Scout" flag. BSA policy is clear on this too.   The Scout uniform may not be used directly to raise money for any other organization. Not your church, not the Salvation Army (no bell ringing in BSA livery), not a worthy elder care facility. Sorry, ,,,

Anyone have the Idaho Council Phone number?

 

 

Edited by SSScout
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Hm....raises lots of questions for me but since we dont have all of the information it is all speculation.

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In this town, there's a special word for such armchair crumudgeons, I won't waste it here.

The day that scouting serves only scouts is the day I turn in my Fleur-de-lis. 'Nuff said.

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Of course that's not enough said! I'd have this conversation with the scout:

Me [in my sternest stop-wasting-matches voice]: Scout, did some of my money that I spent on your popcorn actually go to some old folks so they could party up at Christmas?

Scout: Sir, yes sir. It did. But that was before strangers on the internet accused me for misappropriation ...

Me: Keep it up. And double my order for next year.

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So, news outlets are notoriously lazy about details. It didn't actually say that $1200 cash was donated to the senior center. It vaguely "went to" the senior center.

If the Scouts in the unit decided to spend $1200 on an event that they made possible for the Senior Center, I don't see a single issue for that. That's not raising money for another organization, that's using money they've raised for their unit to do a good turn for a neighbor. I don't think the distinction between those two things is all that blurry (maybe it can be sometimes). 

We don't really know exactly what happened. Sure, the article makes it sound like donated money, but I don't see a direct quote from anybody stating it was donated money. Just that it was used for the benefit of the seniors. I've read too many news articles about issues I had first-hand knowledge about to use anything written in a news article as evidence of wrongdoing. 

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BSA policy is, for BSA especially, pretty clear, as is the policy barring troop neckerchiefs not approved by council and not of identical size and  triangle shape as official BSA-sold neckerchiefs.  Perhaps fewer rules, and those  reasonable and enforced, would make more sense for BSA and IRS.

The IRS has had very drastic funding cuts over the last seven years and is relying on obsolete computers and software more and more.  IRS is  also the second most unpopular federal agency with voters - only VA gets worse marks, and VA is perceived as killing veterans. 

INDIVIDUAL SCOUT ACCOUNTS AND FUNDRAISING BY BSA UNITS -  Frequently Asked Questions  (2/11/2014)

"Are individual Scout accounts permitted? Yes. These accounts are permitted when funded by the youth member through savings, a portion of a weekly allowance, and chores around the home and neighborhood. The youth member’s family may contribute, but no charitable deduction is allowed.

What is private benefit, and why is it not allowed? Private benefit is when funds raised in the name of Scouting or another charity are directly allocated to the youth member or family doing the fundraising. Funds raised in the name of Scouting should benefit the entire unit. The tax laws do not permit private benefit, with the exception of an “insubstantial” benefit.

How is an “insubstantial” benefit defined? The IRS has classified 30 percent of the money raised as “substantial,” and less than 2 percent as “insubstantial.” The burden of proof that the benefit is “insubstantial” is on the organization. Are incentives allowed for participation in fundraising or sales? The IRS has not ruled on this matter, but the “insubstantial” benefit restriction would apply.

Can Scouting units use funds to assist youth members who have a financial need? The unit can allocate funds based on financial need, and may consider factors such as participation in the unit, advancement, and Scout spirit.

Are there penalties for private benefit or other tax issues? Private benefit may result in the loss of tax-exempt status for the chartering organization, or the local council. Allocating funds raised in the name of Scouting directly to a youth member could result in self-employment tax liability.

Questions? Please contact your local council. Thanks for all that you do."

For what it's worth, recalling that square troop neckerchiefs and distinctive patrol neckerchiefs are a definite "no-no": 

https://blog.scoutingmagazine.org/2014/12/03/individual-scout-accounts/ ("What’s definitely not OK.  Money raised in the name of Scouting that isn’t used for Scouting is a definite no-no.")  😢

 

 

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From IRS.GOV 01/25/2020:

"INTERNAL REVENUE SERVICE Number: INFO 2002-0041

Release Date: 3/29/2002 February 15, 2002

UIL: 501.03-08 501.33-00

[REDACTED] xxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxx

Re: xxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Dear Mr. xxxxxx:

We received your recent letter requesting information regarding a program you are considering adopting within your xxxxx Scout Pack. You indicate that your Pack is xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx tax exempt under section 501(c)(3) of the Internal Revenue Code. One of the purposes of the Scouting program is to instill self-reliance ixxxxxxxxxx. You indicate that one way of doing this is to allow the xxxxxx to earn their own way as opposed to depending on others, including their parents, to fund their individual scouting participation.

To further this self-reliance, you are proposing to allow the xxxxxx in your Pack to raise monies through fundraising activities and to designate the use of some of these funds to pay for personal expenses. These expenses would include 1) Scouting fees such as organization dues and camp registration fees; 2) items used exclusively for Scouting such as uniforms and Scouting books; and 3) items used primarily for Scouting such as camping equipment.

Using the money raised in various fundraising activities to further the Scouting program for all of the xxxxxx in your Pack is in accordance with your exempt purposes xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. In this regard, the Pack could use the funds (all or a percentage) it raises to reduce or eliminate dues and various registration fees, purchase uniforms and Scouting books and purchase camping equipment. The Pack could also use its funds to provide assistance to individual Scouts in cases of financial hardship.

The distribution method you are proposing - the creation of a reserve fund within the Pack where a portion of the money that an individual Scout raises during a fundraising 2 event is reserved for xxx use alone, is a troublesome one. Earmarked accounts may not be compatible with continued tax exemption. Such a decision cannot be made without considering all of the facts and circumstances. Accordingly, we are not ruling definitively at this time. We hope the following general discussion will be helpful.

Section 501(c)(3) of the Code provides, in part, an exemption to the federal income tax for organizations organized and operated exclusively for educational, charitable or other exempt purposes. Under the Income Tax Regulations, an organization will be considered operated exclusively for exempt purposes if it engages primarily in activities which accomplish those purposes. If more than an insubstantial part of an organization's activities do not further its exempt purposes, it will not be considered operated exclusively for exempt purposes. In addition, an exempt organization must serve a public rather than a private interest. Thus, an organization must establish that it is not organized or operated for the benefit of private interests, such as designated individuals.

The private benefit prohibition is broad and includes the individual Scouts and their parents. The amount of private benefit that will be permitted depends on the magnitude of that benefit in relation to the public benefit derived from the organization's activities and whether that private benefit is necessary for the organization to achieve its exempt purposes. In considering whether a private benefit, such as earmarked accounts for the personal benefit of individual Scouts, is substantial enough to jeopardize your exemption, one must examine all of the facts and circumstances. In relation to the public benefit inherent in the Scouting program, this may be a small private benefit. Whether the private benefit to the individual Scouts is necessary to achieve the goals of the Scouting program, however, is not clear.

We discussed a similar question in regard to athletic booster clubs that earmarked a portion of their fundraising proceeds to be shared only by the members who participated in the fundraiser in the 1993 CPE text (a copy is attached for your convenience). In the hypothetical addressed in the Article (Example one on page 5), we 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(c)(3) of the Code.

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 3 511 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.

This letter is advisory only and has no binding effect on the Internal Revenue Service. The information provided here cannot be relied upon as a ruling on the matters discussed. If you have any questions regarding this discussion or we can be of further assistance, please feel free to call me at 202-283-8926 or Ms. xxxxxxxxxxxxx at xxxxxxxxxxxx.

Sincerely, /s/ Gerald V. Sack Gerald V. Sack Manager,

Exempt Organizations Technical Group 4"

 

Edited by TAHAWK

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Does a scout have any say?  Only so far as the troop follows his suggestion.  But there's no reason in this story to think the scout on his own took some of the proceeds of his sales and gave or ordered the giving of those funds to anyone else.

This is a news story that has two facts: 1) a scout sold $15k popcorn, 2) some portion of the money raised from those sales was used to help a local nursing home.  There is a causative relation between the two facts: in order for there to be money to give to the nursing home there had to be a sale of popcorn. There's nothing inaccurate about the story as told, but in a local feel good news item of less than two minutes duration there's no time and no reason to walk through the obvious chain of events: 1) Scout sold $15k popcorn, 2) after paying council troop retainss $5k from those sales, 3) troop decides by whatever process they used (presumably including some input from scout and his family) to pass some of that largess on to nursing home.

As a practical matter there's no other way for this to work.  Unless the scout only accepted cash, or cash plus checks made out to him personally, the money from the sales all has to pass through the troop's accounts, and ultimately it's the troop writing whatever check or other form the donation took.

It's just a pleasant little story to fill up one third of the time between two commercials on the local news broadcast and nothing more.  Don't over think it.

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