{"id":42,"date":"2015-02-15T19:29:00","date_gmt":"2015-02-16T01:29:00","guid":{"rendered":"http:\/\/admin.patheos.com\/blogs\/janetheactuary\/2015\/02\/exhibit-a-on-why-we-need-tax-reform.html"},"modified":"2015-02-24T21:14:37","modified_gmt":"2015-02-25T03:14:37","slug":"exhibit-a-on-why-we-need-tax-reform","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2015\/02\/exhibit-a-on-why-we-need-tax-reform.html","title":{"rendered":"Exhibit A on why we need tax reform"},"content":{"rendered":"\n<\/head>

No, not nonsense about per-child or other kids of tax credits.<\/p>\n

But instead, a change in IRS regulations that\u2019s causing a lot of headaches for non-profits, specifically youth organizations.<\/p>\n

In my sons\u2019 Scout troop, the annual wreath sale splits its profits two ways: half to the troop, half to individual Scouts\u2019 accounts which fund their expenses during the year, for outings or summer camp. \u00a0Lots of other youth organizations do the same \u2014 my oldest son\u2019s marching band has similar \u201caccounts\u201d to which money flows whenever they have fundraisers, based on the student\u2019s individual sales of Butter Braids, cheesecakes, and, I\u2019m sure, more to come in the spring, in order to fund their biennial Spring Break trips.<\/p>\n

These fundraisers are a means of enabling the tweens and teens to, in part, pay their own way, both as a lesson in personal responsibility, and, for financially struggling families, to make the trip possible in the first place. \u00a0And the fact that this requires individual initiative on the boys\u2019 part means that it really doesn\u2019t make sense to require that the funds raised be pooled in order to offset the cost for camp as a group.<\/p>\n

But the IRS has up-ended, or at least put a great deal of uncertainty, into this system.<\/p>\n

Here\u2019s an article describing<\/a> a series of IRS rulings on such fundraising accounts. \u00a0Its key paragraph:<\/p>\n

In a series of rulings, both recent and over the last few years, the IRS has examined the issue of what they term \u201cprivate benefit\u201d from activities of non-profit organizations (usually called \u201c501(c)(3)\u201d from the section of the IRS code that regulates them). In order to remain eligible for non-profit status, money raised by the organization must be used for the public good, not to enrich the members personally, either in the aggregate or directly attributable to an individual\u2019s portion of the fundraising. Scouting units are owned by their chartered organizations, and their non-profit status is conferred upon them by the CO, most of which are 501(c)(3) organizations. Private benefit to members in anything more than an insubstantial amount may jeopardize the non-profit status of the parent organization. Initially, the IRS ruled in a case involving sports booster clubs, but have also passed judgment in a similar manner when a ruling in a Scout context was requested. The same approach applies as well to church youth groups, marching bands and academic clubs.<\/p><\/blockquote>\n

Now, this isn\u2019t new \u2014 the primary ruling itself dates from August of 2013 \u2014 but everyone\u2019s still trying to figure out the implications. \u00a0What is this \u201cinsubstantial\u201d amount of benefit to individual members which is still allowable? \u00a0No one really knows. \u00a0Is the practice of my sons\u2019 troop, with its 50\/50 split, still allowed? \u00a0Or is \u201cinsubstantial\u201d defined with respect to the overall budget of the chartering organization, in our case, our church? \u00a0My husband, an Assistant Scoutmaster, spent quite some time trying to figure this out, and found all manner of answers, but he ultimately threw his hands in the air, and said, \u201cI\u2019ll ask the lawyer among the troop leaders to figure this out.\u201d <\/p>\n

What makes this particularly unfortunate is this: \u00a0I imagine that, as a matter of general principle, most families wouldn\u2019t be too upset at a policy that treats these boys\u2019 earnings similar to other ways that kids can earn money, such as a paper route or babysitting \u2014 especially since, in this day and age, paper routes and babysitting jobs (OK, I don\u2019t know about the latter \u2014 I have boys, though my middle one wants to find a way to get a babysitting gig) are harder to come by as a means of earning money when you\u2019re too young to get a job or can\u2019t get hired or commit to a \u201cregular\u201d job in any case.<\/p>\n

But it doesn\u2019t seem possible to just say, \u201cOK, no big deal, this\u2019ll just be taxable income for the boys.\u201d \u00a0The reporting and all the other compliance issues seem to mean that this is a nonstarter. \u00a0And when our taxation system is so hideously complex that perfectly reasonable* fundraising programs are at risk \u2014 that\u2019s what we need tax reform for. \u00a0Not to dole out more money to favored groups via \u201ctax credits,\u201d or to hike taxes on disfavored groups. \u00a0But simply to make the entire system more functional.<\/p>\n

(* I\u2019ve long been a fan of fundraisers that oblige the children to do real, meaningful work to earn the funds they raise, especially when it comes to older children. \u00a0I\u2019m not a fan of parents taking the fundraiser order forms to work, and I\u2019m not thrilled with products with an enormous profit margin either, even though I\u2019m \u201cPopcorn Kernel\u201d \u2014 yes, cheesy name \u2014 for the Cub Scouts. \u00a0But the wreath sales, and car washes, and pancake breakfasts are all opportunities for the kids to raise money and learn a bit about work as well.)<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

No, not nonsense about per-child or other kids of tax credits. But instead, a change in IRS regulations that\u2019s causing a lot of headaches for non-profits, specifically youth organizations. In my sons\u2019 Scout troop, the annual wreath sale splits its profits two ways: half to the troop, half to individual Scouts\u2019 accounts which fund their […]<\/p>\n","protected":false},"author":2209,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[21,27,26],"class_list":["post-42","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-irs","tag-scouts","tag-taxes"],"yoast_head":"\nExhibit A on why we need tax reform<\/title>\n<meta name=\"description\" content=\"No, not nonsense about per-child or other kids of tax credits.But instead, a change in IRS regulations that's causing a lot of headaches for non-profits,\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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