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Latest Guidance on Individual Scout Accounts

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What is the latest guidance on Individual Scout Accounts and where can I find it?  Everything I see in the forums disappears after about 2014, with little new discussions.  This was part of our unit charter and as our relatively new Troop (5-10 years old) is preparing for our first forays into a High Adventure Camp next summer, we have had a lot of questions on the monies earned by high selling Scouts and what they can be used for with regards to a High Adventure trip.  I know it can't go toward personal gear, but what other restrictions are there?  Thanks

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Posted (edited)

This is a really thorny issue.

There are several sets of Bryan on Scouting articles on this topic over several years. The latest I know of is here:

https://blog.scoutingmagazine.org/2014/12/03/individual-scout-accounts/

The BSA also has a publication on this topic, which I find less than helpful personally.

There are also IRS letters of various forms out there.

Edited by CynicalScouter

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9 minutes ago, CynicalScouter said:

This is a really thorny issue.

There are several sets of Bryan on Scouting articles on this topic over several years. The latest I know of is here:

https://blog.scoutingmagazine.org/2014/12/03/individual-scout-accounts/

The BSA also has a publication on this topic, which I find less than helpful personally.

There are also IRS letters of various forms out there.

Thanks.  Our Troop was formed before this guidance was put out so it is possible our Charter needs to be updated.  We have had some Scouts sell hundreds or even a thousand or more $$s in popcorn, and we wanted to know what they can use the money for.  It is a huge disincentive to take everything a Scout sells and provide it to the unit.  We don't base what it costs to run our unit on any projections for fundraising, so if someone goes above and beyond, we wanted to know if that money can go to that Scout to use for their fair share dues for the year, summer camp payments, or even payments for Philmont/Sea Base/Northern Tier/Bechtel.

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Posted (edited)

The gist of the matter is this:   The Scout is earning money for THE UNIT , not for him/herself.   The Unit's bankroll (checking account, etc.)   ultimately belongs to the Charter Organization.

Any money collected selling popcorn/mulch/candy/lightbulbs or earned by parking cars/raking leaves/flipping pancakes goes into the units bank account.   There can be NO seperate bank accounts, but if the treasurer thinks it appropriate, a paper accounting is made:  columns for Johnny, Timmy, Susie, etc..  This money CANNOT be used to buy personal stuff (boots,  backpacks, wool socks, uniforms, tshirts).   It can be used to  buy the Unit's  general stuff  (awards, Troop neckers, Class B tshirts that everyone gets, flags,  trailers,  spare tires for the trailers,  Troop Tents that everyone can "borrow",  Merit Badge Books for the Troop Library,,,,),  It can be used to offset Scout Dues, Boys' Life, or even summer camp fees..  This is not to say that the Troop Committee can't decide to use it's money  for a "charitable"  reason, ie.,  a uniform or Campership for a deserving Scout whose family is in hard times, say.  How the income is divvied up per Scout( Columns ?) is up to the Troop Committee,  GAAP..... (generally accepted accounting practices....) 

Since the  money really belongs to the CO (who is sponsoring the Scout Unit , and the CO knows the money is being used for "Scouting")  it should NOT be  passed on to another entity without the CO's permission.  This includes the Scout transferring to another Scout Unit:   Cub Pack to ScoutsBSA Troop, one Troop to another Troop, like that, altho this is done "all the time", it shouldn't  be. .  The Unit's money is the Unit's money.  

Back in paleo-Scout time,  my Troop would sell donuts (explained elsewhere here), but the idea of "Scout Accounts" never occurred to anyone.   You wanted to go to camp?   The whole Patrol might do a carwash at the church just for summer camp fees among the Patrol.  One worked and saved up by  doing extra chores at home. The Bank of Dadandmom  held the account.  The Troop Bank (!)  might help discount the personal fees, but that meant just about the whole Troop was going to camp and each Scout (family?) still had to cover the rest.  I do remember a story from another Troop whereby the Scout family  applied for a campership, it was granted, the Scout went to SummerCamp , and when a problem arose, and the Scout's family had to be contacted, it was discovered they were at Disneyworld.... 

Please bear in mind, I am not an CPA, nor do I play one on TV . What I described above is how it was explained to me by Scout financial people.   I hope I helped.....

 

Edited by SSScout

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A Scout is thrifty.  He pays his own way.  

"Scouting does not accept charity - except when we do."

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Posted (edited)
11 hours ago, vtcchokie92 said:

What is the latest guidance on Individual Scout Accounts and where can I find it?  

You will NOT get a clear cut answer.  

You will get the answers people want to give to justify a desired answer.  

Scout accounts is always a very contentious debate in scouting.  Heck, money always messes things up. 

 

11 hours ago, CynicalScouter said:

This is a really thorny issue.

There are several sets of Bryan on Scouting articles on this topic over several years. The latest I know of is here:

https://blog.scoutingmagazine.org/2014/12/03/individual-scout-accounts/

The BSA also has a publication on this topic, which I find less than helpful personally.

There are also IRS letters of various forms out there.

BSA's publication is fairly consistent with IRS's letters.  IRS has intentionally left this vague and rules are set by precedent on a case-by-case basis.  But, IRS's intention is clear.  Money is for the non-profit.  Below substantial amounts, scouts can receive to their scout accounts funds as an incentive to help raise funds for the unit. 

Dollar "amounts" is mentioned because small amounts minimize IRS audit risks.  IRS cases from 1990s reflect band boosters with 60,000+ in fund raising (if I remember right). 

The main issues are interpreting "private benefit" and "substantial".  Substantial private benefit is wrong.  

 

Here's my recommendation.

  • Don't let this burn friendships or people.  Depending on the debate and who's involved, this can go every direction.  
  • Publish your rules.  Be consistent.  Be kind.  Be courteous.  
  • Don't sweat it if your troop doesn't get the exact answer you want.  It's really hard to get a clean answer.  
  • Watch for people getting upset.  Money is always a contention point.

 

For me, I think the IRS rules are clear.  Scout accounts can receive benefits from fundraisers, but keep it 10% to 20% of sales.  Over 30% is substantial and against IRS rules.  Under 10% won't be a an incentive.  It's just that the risk of being audited is extremely low with the amounts an average troop uses for fund raising.  Even if your troop raises $30,000 in wreaths.  BUT, if your troop is depositing $100,000 each year in your troop bank account from a single fundraiser, then I'd be more concerned.

At some point, if you really want a good answer, hire a tax attorney and pay them their fee to get an answer.  And, if you don't like the answer, get a different tax attorney.  You probably will get a different answer.  :) 

Edited by fred8033
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So, rather than teaching scouts and parents that following the rules and laws of the land is what we should do (A Scout is Obedient), we should spin and obfuscate and do what we can to "minimize the chances of an audit", even though it may be illegal.  Got it.  From my reading of the tea leaves, it will all soon be a moot point anyway.

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9 hours ago, fred8033 said:

You will NOT get a clear cut answer.  

You will get the answers people want to give to justify a desired answer.  

Scout accounts is always a very contentious debate in scouting.  Heck, money always messes things up. 

 

BSA's publication is fairly consistent with IRS's letters.  IRS has intentionally left this vague and rules are set by precedent on a case-by-case basis.  But, IRS's intention is clear.  Money is for the non-profit.  Below substantial amounts, scouts can receive to their scout accounts funds as an incentive to help raise funds for the unit. 

Dollar "amounts" is mentioned because small amounts minimize IRS audit risks.  IRS cases from 1990s reflect band boosters with 60,000+ in fund raising (if I remember right). 

The main issues are interpreting "private benefit" and "substantial".  Substantial private benefit is wrong.  

 

Here's my recommendation.

  • Don't let this burn friendships or people.  Depending on the debate and who's involved, this can go every direction.  
  • Publish your rules.  Be consistent.  Be kind.  Be courteous.  
  • Don't sweat it if your troop doesn't get the exact answer you want.  It's really hard to get a clean answer.  
  • Watch for people getting upset.  Money is always a contention point.

 

For me, I think the IRS rules are clear.  Scout accounts can receive benefits from fundraisers, but keep it 10% to 20% of sales.  Over 30% is substantial and against IRS rules.  Under 10% won't be a an incentive.  It's just that the risk of being audited is extremely low with the amounts an average troop uses for fund raising.  Even if your troop raises $30,000 in wreaths.  BUT, if your troop is depositing $100,000 each year in your troop bank account from a single fundraiser, then I'd be more concerned.

At some point, if you really want a good answer, hire a tax attorney and pay them their fee to get an answer.  And, if you don't like the answer, get a different tax attorney.  You probably will get a different answer.  :) 

Thanks for the well laid out discussion.  Let me be clear - we do not have separate accounts for each Scout - it is tracked on a Spreadsheet, and includes our Fair Share payments (annual dues), Recharter fees, summer camp, etc.  This helps us track which Scouts have paid, which ones may need some assistance from a Benevolence fund within our Troop budget, etc.  As I said, it is in our Charter from 2012 that all new Scouts (and parents) have to read and sign when joining, so they understand the rules.  Also, our Fair Share is determined using a budget based on historical expenditures for advancements, fees for Camping, Swim tests, etc. and does not take into account fundraising projections.  That would be wishful thinking not a budget and with our Troop's low fundraising ceiling, it would hurt the program overall. 

We want to make sure we are obeying the rules while making sure that we keep the Troop running.  With the COVID craziness this year, our annual dues have been harder to collect (timing and availability of funds for some parents), so we need to pay attention to where our funds are going down to the penny.  Having a Philmont trip on the horizon for next year has raised questions on what the ISA funds can and cannot be used for.

As was stated above, everyone gives you their own interpretation of the rules and what the money can be used for.  It is good to have this resource to ask questions of fellow Scouters - this is nothing like what my Scoutmaster had to deal with when I was in Boy Scouts as a Scout.

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Posted (edited)
1 hour ago, scoutldr said:

So, rather than teaching scouts and parents that following the rules and laws of the land is what we should do (A Scout is Obedient), we should spin and obfuscate and do what we can to "minimize the chances of an audit", even though it may be illegal.  Got it.  From my reading of the tea leaves, it will all soon be a moot point anyway.

That is ultimately what this boils down to: individual scout accounts funded via proceeds from fundraising for the unit (e.g. Scout gets XX% in their personal account to use as they direct) violates IRS rules, but since those rules won't be enforced (via audit), we are just going to go ahead and do it anyway.

Edited by CynicalScouter
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THE IRS HAS BEEN SYSTEMICALLY DEFUNDED OVER THE LAST TEN YEARS.  ITS "LEGACY" COMPUTERS AND SOFTWARE CANNOT KEEP TRACK OF NUMBERS, CANNOT APPLY THE LAW, AND CANNOT DO THE ARITHMETIC.

 

Since November, 2018, we have received a series of bizarre and internally contradictory  communications from IRS automated systems.  For the most part, those systems act autonomously.  One series of three bills entitled  "CP2000" made an error of 2x our total income in favor of the Government, made an error of $3,600 in our favor, made rounding errors on every single number ending in $.50 or above, sent us an additional refund, and proposed an additional refund while accusing us of underreporting income by over $2,000.  The IRS employees were uniformly polite, except the punk IRS  lawyer who assumes anyone questioning IRS  claims is a "tax protester" - the aluminum foil hat crowd.  IRS was running over a year behind on much of its work before the G dumped this "stimulus" check wealth transfer on them.

My point?  Tax enforcement will continue to deteriorate both in volume, timeliness, and accuracy.

 

The only IRS "center" left that processes paper returns is due to close in 2022, even as private tax-preparation software gets less and less reliable.  As it is, the scanners make many errors.

 

 

 

 

 

 

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5 hours ago, vtcchokie92 said:

Let me be clear - we do not have separate accounts for each Scout - it is tracked on a Spreadsheet, and includes our Fair Share payments (annual dues), Recharter fees, summer camp, etc.  This helps us track which Scouts have paid, which ones may need some assistance from a Benevolence fund within our Troop budget, etc. 

That's the same thing our troop does.  Our current treasurer uses a spreadsheet.  Previous treasurers used Quicken or another tool.  The key is that all transactions roll up through the scout account, aka "virtual" scout account.  If the scout makes a payment, it credits the scout account.  If the scout is charged for camping, dues, etc, then the scout account is debited.  If parents want, they can see how their scout's account has increased and decreased over the year.  When scouts get credit from a fundraiser, it's just a credit to their scout account. 

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11 hours ago, scoutldr said:

So, rather than teaching scouts and parents that following the rules and laws of the land is what we should do (A Scout is Obedient), we should spin and obfuscate and do what we can to "minimize the chances of an audit", even though it may be illegal.  Got it.  From my reading of the tea leaves, it will all soon be a moot point anyway.

 

10 hours ago, CynicalScouter said:

That is ultimately what this boils down to: individual scout accounts funded via proceeds from fundraising for the unit (e.g. Scout gets XX% in their personal account to use as they direct) violates IRS rules, but since those rules won't be enforced (via audit), we are just going to go ahead and do it anyway.

 it simply isn't true that the law is clear on this, and that use of these accounts within reason is a clear violation of the law or IRS regulations, or is contingent simply on the idea that one won't get caught.  I hold a law license, I asked a friend who is a tax practitioner to take a hard look at this, and their conclusion was that individual accounts, at least as we use them and as most troops  do, are not a violation of either the letter or the spirit of the federal statutes and IRS regulations.  As Fred8033 said, ask a different tax lawyer and you can get a different answer, I would bet that if you ask a third you'll probably get yet a third answer.  Some day, maybe, a federal court will provide a clarifying opinion that will most likely fall somewhere amongst those three legal opinions. 

Laws are often not written in a way that they can provide an answer to every question that might arise.  Regarding scout accounts, it just is not at all clear that Congress in writing its laws, or the IRS in promulgating their regulations interpreting and implementing those laws, intended to remove the protections of non exempt status from our large, complex, several thousand member CO church just because Johnny scout only pays $100 for summer camp while Jimmy scout has to pay $300 because Johnny out hustled Jimmy at popcorn selling.

You can feel strongly that your interpretation of the law is more correct, but that doesn't mean that those with a differing opinion are acting in bad faith.

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On 6/23/2020 at 9:01 PM, T2Eagle said:

It simply isn't true that the law is clear on this, and that use of these accounts within reason is a clear violation of the law or IRS regulations, or is contingent simply on the idea that one won't get caught. 

When I ran a business, I initially invested hundreds (probably thousands) of hours understanding how to setup a business and setup the whole infrastructure.  ... It was cool.  IRS would send paper copies of each and every of there publications.  And, there was this place in Pueblo, CO that would send educational materials.   ... Then, I discovered the incredible, incredible value of an accountant specializing in business administration and tax preparation.  unemployment, quarterly filings, with-holdings, etc.  I often joked with her that she kept me out of jail  .  The KEY is that the accountant rarely spoke of legal vs illegal.  The tax preparer almost always spoke in terms of audit risk / attention risk.  ... She was often annoyed how risk adverse I was.  ... She was the best business expense I had and I was happy to pay her invoice when it came.  

This might be semantics, but it's the thresholds that are NOT clear.  The law is clear.  If Johnny brings in a fundraising net of $200, all $200 going to Johnny is wrong.  It's the what about $100?  What about $60?  What about $10?  From what I've seen, IRS says 30% is "substantial".  If the remaining fundraising dollars only lower Johnny's costs without lowering cost of others in the troop or helping the troop as a whole do more, then it's "private benefit" and not a non-profit actual.  

 

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If you want absolutes, ...

  • Don't do fund raisers
  • or ... Don't route any fundraiser profits to scout accounts
  • or ... Run it as a for-profit event (aka helping individual scouts reduce their cost)
    • Pay sales tax. 
    • Give the scouts an IRS 1099-MISC for scouts earning about IRS threshold

But it seems clear, there is a reasonable middle ground.

 

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10 minutes ago, fred8033 said:

When I ran a business, I initially invested hundreds (probably thousands) of hours understanding how to setup a business and setup the whole infrastructure.  ... It was cool.  IRS would send paper copies of each and every of there publications.  And, there was this place in Pueblo, CO that would send educational materials.   ... Then, I discovered the incredible, incredible value of an accountant specializing in business administration and tax preparation.  unemployment, quarterly filings, with-holdings, etc.  I often joked with her that she kept me out of jail  .  The KEY is that the accountant rarely spoke of legal vs illegal.  The tax preparer almost always spoke in terms of audit risk / attention risk.  ... She was often annoyed how risk adverse I was.  ... She was the best business expense I had and I was happy to pay her invoice when it came.  

 

My wife is a corporate CPA and you just described her job perfectly. She can't control behavior, she can only advise the risk of the behavior. And once in a while she will advise when to call an attorney. 

Barry

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