Does anyone break out their funds by scout or have a point system that I can see? I am new to treasurer and we have most kids that participate and some kids/parents that do not and i would like to reward/help the kids that do participate.
Are you talking about scout accounts (careful, you could start a religious war )? Are you looking to incentivize participation? I have heard of units that implement a point system for volunteers. This can backfire as families fulfill their quota of points for the year, and consider their obligation to help complete. Personally I prefer to find ways to recognize those who help with things like a volunteer of the month award. You can use this to highlight a person who volunteered for the first time, or took on a more significant role.
@BoyMom - what our unit does is credit fundraising toward due/registration. As an example $10 off per $100 sold. The avoidance of substantial benefit is what causes issues on scout accounts. If substantial benefit it starts the need for 1099 reporting.
Breaking it out by scout seems to be harder than i thought it would be. Someone mentioned a point system and using that at the end of the year to determine if say for example pay your recharter in full. The scouts that do not have enough points at the end will need to pay.
This seems like a good option. Thank you
These kinds of systems can be tough to administer. You will need volunteer check in sheets and then someone to compile the records at the end of the event and end of year. Over time you end up with parents making a mad dash for the easy jobs when volunteer registration opens. You’ll also need a system to allow for job swaps as a parent might have signed up to help with the PWD in September, but find they have to travel for that event in January. I am exaggerating somewhat, but this can create an “us versus them” that your really don’t want in a well run cub pack. Best suggestion I have is to bring this up at a Roundtable meeting to see what other units in your area are doing.
For me, blanket pleas for help via email often don’t work. I try to be direct, walk up to a person, shake their hand and simply ask if they can help with a specific task. It’s harder to say “no” when they have to look you in the eye.
@BoyMom, our pack was doing this when I arrived. I insisted we put an end to the practice. Scout accounts can create serious tax problems, including your chartered organization losing its exemption from federal income tax, if it is exempt as most are. The earnings from fundraising belong to the chartered organization. No part of the earnings of a public charity may inure to the benefit of any private individual. I do not ever want to have a sit down with the committee chair, the COR and the pastor to apologize for our use of Scout accounts and causing the church to become a taxable corporation for federal income tax purposes.
We base fee rebates on popcorn sales. There is a threshold for free campouts, and a higher threshold for free dues.
For tracking, we go by calendar year so first year in scouting you pay full dues and pay for the fall campout. After popcorn sales are done, we just note who we pay dues for the following year and who gets free campouts for the calendar year.
To incentivise the Webelos that are leaving (and won’t get the benefit of the free campouts) we give gift cards to the scout store if they meet the free campout sales goal. We have not had a Webelos hit the free dues sales goal since I’ve been around, but I imagine giving the troop they cross over to a check for their national dues would be acceptable.
I would like to point out that
- A scout who attends camp, makes a car for a PWD, looks sharp in uniform, or otherwise prepares to be truly epic is providing more of a benefit to his/her pack than to him/her self.
- Not a single CO has been brought to task by the IRS because of their individual scout accounts. Not a single SM has ever had to apologize to a CC, COR, or IH (be they pastor, legion commander, etc …) for causing the institution to lose its tax exempt status.
- The cases in which the IRS did comment were athletic clubs, and the individual accounts involved sheltering parents from taxes to the tune of tens of thousands of dollars.
- Were scouts to file their “earnings” through fundraising, they would likely have zero tax burden. The expense in processing those files would be an undo burden on the US taxpayer.
All that said, tracking individual scouts just to give them an discount in camp fees is tedious. If you can give the same discount to everyone with out being envious of the family whose scout didn’t participate that much, you all will have more time to enjoy the program with your scouts.
@Qwazse, you are correct that there has been no reported case of a chartered organization losing its tax-exempt status over Scout accounts. However, please see IRS Information Release 2002-0041 Quoting from the release…
The private benefit prohibition is broad and includes the individual Scouts and their
As a matter of public policy, the IRS does not want to chase around Cub Scout packs and their chartered organizations over Scout accounts. They won’t actively seek these out. In fact, they could have issued this information release as a revenue ruling and given it more weight, but they declined to do so. Chasing Scout accounts is one of the best ways I can think of for the IRS to paint itself as an evil villain. It’s right up there with state tax authorities kicking over lemonade stands, because the child has no vendor license and isn’t registered to collect sales tax.
Whether the IRS chases after it or not, the law is clear, and a Scout is obedient. That;s the standard we should follow.
You are also correct that if the Scouts were to report the income on their returns, there would rarely be one who owes tax. However, if the chartered organization is a charity, the IR correctly points out that the profits from the fundraising would likely be best characterized as unrelated business income, and the charity would be taxed on it. So, issuing Form 1099-MISC to the Scouts might solve one tax problem, but it creates another. Many states tax unrelated business income of charities as well.
There is no question that allowing a Scout to earn money and pay his or her own way creates benefits for the entire community, not just for the individual Scout. Based on that, I don’t believe the law produces a result that is for the common good. However, when a Scout believes a law is unjust, s/he obeys it and works through the system to change it.
Do you have a spreadsheet that you may be able to send me?
Oh the infamous information release! One should never cut off a quote of it too soon:
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 other words: is the scout account really his/hers? Or is the scout being given stewardship of unit funds in order to prepare to benefit the community? In other words does Johnny or Jane sporting a uniform or going to camp fulfill some established mandate? Perhaps one that some body politic has recognized?
… to promote, through organization, and cooperation with other agencies, the ability of boys to do things for themselves and others, to train them in scoutcraft, and to teach them patriotism, courage, self-reliance, and kindred virtues, using the methods that were in common use by boy scouts on June 15, 1916. – Title 36 US Code 30902
The advisory makes clear that nobody has carte blanche, and using a scout account to launder substantial earnings will be prosecuted. But it also makes clear that the advisory “cannot be relied upon as a ruling on the matters discussed.”
This is part of the reason my council recommends units that use Scout Accounts credit no more than 50% (but preferably 40% or less) or the net proceeds raised by the Scout to the Scout. This leaves 60% for the unit.
@Qwazse, the text you quoted needs to be read in a different context. The manner in which Scouting units are organized makes them a part of the organization that charters them. The fundraising earnings of a Scout unit are those of its chartered organization, not those of the BSA. When the Service says: “whether that private benefit is necessary for the organization to achieve its exempt purposes,” the organization they mean is the chartered organization, not the BSA.
It is very difficult to determine whether paying for a uniform for a single Scout out of fundraising earnings set aside for that Scout is necessary for the church to achieve its exempt purposes, if other Scouts who did not participate in the fundraising activity must pay for their own uniforms. The BSA’s own rules do not require participants to wear uniforms. So, not having one does not prevent a Scout from participating in what is legally constructed as a youth outreach program of the church. The fact that those who earn money in the fundraising venture get a uniform while those who earn nothing do not get one but still participate is problematic.
Using a Scout account to pay for a uniform is just one of dozens of possible expenditures that might come from a Scout account. What if a pack used the money to pay the that would otherwise be charged to Scouts for a trip to an ice skating rink? Scouts with no balance in their Scout accounts must come out of pocket to pay for the trip. That also appears to be unnecessary in accomplishing the church’s exempt purposes.
If a Cub Scout pack is chartered by a church, and the unit leaders have signature authority over the pack’s account, they have custody and control over that portion of the church’s funds. When they segregate those funds into Scout accounts and then pay expenses that Scouts with no Scout account balances would need to pay for themselves, a private benefit is inuring to the Scouts who do not need to come out of pocket.
In my previous post, I should not have been so lazy and quoted only the single sentence from the IR. As a tax professional, I read that one sentence as saying that if any private benefit inures to a Scout or his or her parents, the private benefit prohibition has been breached. In the tax-exempt organization world, that means the Death Penalty is in play. I can see how a lay person might not immediately reach that same conclusion.
So, here are some more quotes from the IR:
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.
What the Service is saying there is that a unit that raises enough money to buy books and uniforms for all its members is in the clear. The unit could also reduce what all its Scouts would otherwise pay for dues. Buying everyone a backpack also has the blessing of the IRS. The Service even allows the pack to provide assistance to an individual Scout based on need.
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 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.
The Service describes what we commonly call Scout accounts as troublesome. It says that these “earmarked” accounts may not be compatible with continued tax exemption. That means the Death Penalty is in play for the chartered organization. Scout accounts can trigger it.
There is likely some level at which Scout accounts are de minimis and pose no risk to the chartered organization’s tax exemption, but no one knows for sure what that level is. As mentioned in one comment above, some councils suggest capping the percentage of an individual Scout’s earnings credited to the Scout account, but the cap they suggest is a guess and not based on IRS guidance. The Bryan on Scouting article about this topic has advice from an attorney, but that advice says there is no bright line where you know you’re safe and suggests keeping credits to Scout accounts limited.
My advice is simply not to use them at all, since the IRS has said that they may not be compatible with continued tax exemption. That’s enough to tell me their not worth the risk.
@PeterHopkins You obviously know what you are taking about (though I suspect you err on the side of conservatism, as any professional would), but I’d love to know how that squares with Council popcorn prizes that can be as much as a $300-400 gaming system.
@jacobfetzer, that’s a great question. My guess (which could be wrong) is that the popcorn company absorbs the cost of the prizes. That being the case, these are a commission earned by the Scout and, for the popcorn company, a cost of doing business. They are subject to information reporting on Form 1099-MISC, if the value of the prize is $600 or more. I haven’t done popcorn since 2001, so I don’t know whether a Scout could earn that much. Technically, a Scout who receives a prize valued at $50 has gross income of that amount. Of course, this would not result in any tax due, unless the Scout had significant income from other sources.
If the council absorbs the cost of the prizes, these are likely a fundraising expense for the council, and they are a permissible expenditure. The prizes are attributable to the council’s share of the fundraising earnings, so the Scout has earned a fee for making money for the council. If the value of the prize is $600 or more, the council would have to issue Form 1099-MISC to the Scout.
I haven’t considered this in the past (because I’ve never been interested), but it is possible that Scout council account for the popcorn sale as unrelated business taxable income and pay tax on the net earnings therefrom. If that’t the case, any cost of prizes absorbed by the council would reduce those earnings and thereby reduce the tax due.
I am also a GSUSA volunteer, and the value of some of the cookie-selling prizes easily exceeds $600. I don’t know any girls who have earned such prizes, so I don’t know what the council does with them. They use two different bakeries for the cookies (which is why they are called Trefoils in some places and Shortbreads in others and why not all cookies are available everywhere), and I believe the bakeries absorb most of the cost of the prizes. The prizes differ based on which bakery the council uses. For instance, there is a patch typically available to girls for selling 25 boxes. The patch will be different depending upon the bakery. However, even comparing councils that use the same bakery, the same patch might be earned by selling 25 boxes in one council, 15 boxes in another council and 1 box in a third council. So, the councils clearly have input into how prize levels are determined, and this probably drives the amount of profit the council gets to keep. At some sales levels, a girl becomes entitled to a free week in camp. I don’t know whether the council absorbs that cost or the bakery pays all or part of it.
Girl Scout troops do not have chartered organizations. The troops are ultimately all part of their local council. When one has signature authority over a Girl Scout troop’s bank account, those are ultimately council funds. In my council, detailed cash reports are due in early December and early June. If the balance in the account is more than $25 per registered girl, an explanation of what the funds will be used for must be attached to the June report.
It is encouraged for Girl Scout troops to donate a portion of their cookie profits to charity. Last years, our girls voted to donate 10% of the profits to a shelter for wild animals and another shelter for victims of domestic abuse. As a Cubmaster in a community where many families are struggling, the notion that our pack would ever have money to donate to a worthy cause is mind boggling. The Girl Scout cookie sale is the greatest fundraising program ever invented. Customers feel they are getting real value for the $5 ($6 for premium cookies) per box they pay. This stands in stark contrast to BSA members selling popcorn which I compare to public television stations asking for a $25 donation in exchange for a tote bag.
Thanks for the thoughts. With all that on mind, a unit could decide to give their scouts prize X for selling $Y in popcorn. It sounds like the prize could be free camp or something else.
I disagree about cookies being a great fundraiser for the TROOPS. I will concede that the cookies are a better value for the purchasers, but not so great for the units. My wife was a GS leader for about eight years, and they would sell 10,000 boxes and get $5000 out of it. Meanwhile, in Cub Scouts, we can sell $30k of popcorn (roughly 1000 items), and get $10k out of it.
@jacobfetzer, a fixed reward like a week at camp is far less problematic than a Scout account. Even better if it is for simply meeting a threshold, because a Scout who sell $900 gets the same reward as one who sells $1,300. This makes it look like something other than a sale commission.
I’m not as certain about a discount on dues. Camp is something not everyone needs to pay for. So, a Scout who gets such a reward might not have gone, and his or her parents might not be saving any money with the prize. Dues and registration are required of all Scouts. So, if a unit waives half the dues for meeting a sales threshold, the parents are actually saving money that other parents are paying. That might be construed as a benefit inuring to the Scout’s family.
Of course, an argument could be made that the Scout would simply have quit the program and is only staying because of the discount.
If a unit pays for a week of camp for a Scout who met a popcorn sales threshold, that seems to be an equivalent of compensating the Scout for his or her work. That may mean that it’s a fundraising expense reportable on Form 1099-MISC. It may also mean the fundraising venture is taxable to the chartered organization as unrelated business income. That’s a complicated analysis that I’ll look into if I need to do so, but the possibility shouldn’t be ignored.
Kudos to your wife’s troop, We don’t get 50 cents a box.
There are several reasons I think it is the greatest fundraising program ever invented.
- The product is something so many people want.
- Girl Scout cookies are part of the fabric of America. They are a recognizable brand. Lots of folks have one or more favorites. When people find out your daughter is a Girl Scout, they often ask whether you can get them access to cookies. Rarely does a customer buy only one box.
- Customers, for the most part, feel they are getting fair value for their money. In contrast, nearly everyone who buys popcorn from a BSA member selling it realizes they are making a donation and getting some popcorn as a thank you.
- Although it is not realistic to have a kindergarten-age Daisy “run her own business” in selling the cookies, it is something in which he girls can participate significantly. As they get older, they should be able to sell the cookies with little involvement from their parents. The way in which the cookies sale is supposed to be presented to the girls encourages them to take as much of the responsibility as possible, taking into account their age.
- It is a huge profit center for the local councils. That keeps the cost of membership low. I think it was $25 all in to reregister my daughter for 2019-2010. Girl Scout troops usually charge no dues and can be completely self-sufficient on their fundraising earnings. Our troop didn’t charge for any activities the past two program years.
- The girls are encouraged to donate part of their profits to charity, and many troops do,
- Customers who don’t want cookies can donate them to those serving in the armed forces or a local food pantry. This spreads goodwill as the food pantries greatly appreciate these donations from local troops, and the donation to the troops provides a great public relations opportunity. Our local council got media coverage when it made a cookie delivery to Dover Air Force Base last year.
To be sure, there are lots of things I dislike about how the GSUSA administers the cookie program. First, there is far too much emphasis on it and on fundraising in general. In the 2019 year-end summary I got emailed from GSUSA, it said that over a million girls sold cookies in 2019. It also said that over 400,000 girls attended a council camp. They were bragging about those numbers, but when I read them, I felt that indicates something is wrong.
The Girl Scout fall fundraiser starts in September. They sell candy, nuts, magazines and tchotchkes. The in-person sales are only a few weeks, but the online sales go into early December. In my service unit, they held the first cookie training two days before the fall fundraiser online sale ended. So, they overlap. Cookies could be sold online starting about a week later. Even though they tell you online cookie sales will end in March, they are often extended to meet targets and make sure the council runs out of inventory. They went into April last year.
The amount of energy directed toward the cookie sale with very little profit for the troops can make one feel as though they are working to finance the council. Sales goals are set and expected to be met.
A troop cannot have any other type of fundraiser whatsoever unless it has participated in both the fall product sale and the cookie sale. So, if you have older girls who would like to take a big adventure that will cost more than they can earn from those sales, they cannot even ask the council for permission to have a fundraiser until about 2/3 of the program year is gone. This makes it very difficult to plan something that will be expensive in advance. Ameliorating that to some extent is the fact that many of the older girls who have been in the program for 10 years or more have built substantial customer lists and are quite adept at selling cookies. There were some local girls who took a trip to Iceland last summer.
The way in which the product sales are administered can be grueling. There are training courses that need to be attended annually, including separate trainings that qualify you to sell in a mall. There is a lottery you have to attend at which time slots to sell in front of local businesses are divvied up among troops. If you’re not there, you’ll only get the ones no one wants. Ours was on Thursday during our regular weekly troop meeting. So, we had to be short an adult. The time devoted to this is just extraordinary. They even have the service unit (district equivalent, although much smaller geographically) send spies to these cookie sales to make sure troops are complying with the rules. Cookie delivery is on a weekday in the middle of the day, as if it were the 1950s, and all the troop leaders were stay-at-home moms.
The girls earn badges and prizes, but they might not actually get them until June. In 2018, we handed ours out at the last troop meeting of the program year - the second week of June - more than two months after the cookie sale had ended. We still have not received any of the badges or prizes from the fall product sale which ended about 7 weeks ago. At last word, they were hoping to distribute them on February 9.
So, yes, I have a lot of problems with the cookie sale. It is far from perfect, but it is effective.
If popcorn were not a council fundraiser, and I wanted my pack to sell it, I would have to file a money-earning application with the council. One question on there asks whether customers will get fair value for their money. I would have to answer no, and the council should reject my application. If that’s the standard we set for unit fundraising, why does it get waived when the council gets a cut of the profits?