BOY SCOUTS OF AMERICA

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Conditional Dues

We had our Pack’s annual planning meeting yesterday, and it was brought up that a few of the scouts do the majority of the fundraising. About half participated in the popcorn sale, and about a third in camp cards, with a handful making the majority of the sales. Some parents and committee members think it is not fair for the few to do the majority of the work and all the scouts to benefit from it by not having to pay dues and having campouts and events paid for all the Scouts.

While I agree that it is unfair, I don’t think that matters with the spirit of Cub Scouting and cooperation. The Pack is working together to provide a better program. The scouts who sell more in fundraising do get recognized with prizes, free camps, and activities. Our AOL scouts get to take a portion of their profits from fundraising into their scout account when the cross over to the Troop. We also offer free or discounted activities in the spring to those Cubs who sold popcorn in the fall.

Some have proposed that we require all of our Cub Scouts to work a store front shift or sell at home for each fundraiser or have to pay dues at the end of the year, even though we do not need to collect dues. This, of course, would be presented to the parents at the beginning of the school year. We were able to table the proposal, but it will come up at our next meeting.

I think that defeats the purpose of the Scouts earning their way by giving them a cop out to pay their way, but then again some are not earning their way. It may also leave a bad taste in parent’s mouths if they pay dues when they know we do not need to collect them. I have tried to research this, and cannot find if it is even allowed.

Any input would be appreciated.

I suggest speaking with your council professionals. You need to be very careful that you do not violate any council or IRS guidelines. The IRS prohibits individuals from gaining significant compensation from fundraisers. Some councils define this as being credited with more than 50% of their sales in their Scout account. You also need to be careful when Scouts cross over. Since the funds belong to the Charter org, not the unit or Scouts, transferring funds in a Scout account to a unit chartered by another organization can cause issues.

Purchasing prizes for the Scouts that sell the most is usually fine. Crediting more than 50% of the proceeds to a Scout account can cause problems. You also need to consider WHY some Scouts do not sell much. Is it because their parents are not able to take them out selling? Is it because they are involved in other activities and don’t have time? Could their family or neighborhood financial circumstances prevent high sales?

We need to make Scouting accessible to all. Not every Scout is able to sell a lot of product. These Scouts should not be penalized. Hopefully the parents can stop looking at it as a competition and more as an opportunity to help others.

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Here’s what we do and it works for us–your mileage may vary, and your pack can choose to do something completely different.

First and foremost, the issue of “pack accounts”: I have this problem with my hearing. I’ve been to a doctor several times, even a psychiatrist in case it may be something from my childhood creeping up to haunt me–but it’s just the way it is. When someone says “You guys need to create Pack Accounts for Cub Scouts so those who sell more popcorn get to benefit from those sales,” what I hear instead is “I volunteer to be the Pack Treasurer.”

If you have a volunteer that wants pack accounts for each scout, and they are willing to do the work to maintain the pack finances with each pack members unique account, and they are willing to submit to a tight annual audit of expenses over each program, and they commit to attend and fully report pack finances at each pack committee meeting, and they will ensure that the handling of the funds meets IRS rules, then I say “go for it!”

For us, that’s too much work. We throw it all into the same account and vote on expenses as a pack committee. It’s a lot easier to maintain, and if anyone feels they are not being handled “fairly” they can bring it up at the pack committee and offer a solution.

Credit for Fundraising: I’ve seen packs have special awards, like “sell $x popcorn and Day Camp is free” or “Serve as Committee Chair and get $50 credit toward dues” – I’ve never found success with programs like that but others have. If it works for you, keep doing it.

Additional dues. We charge no additional dues (other than BSA’s dues) for adults. We charge $35 per year per scout (plus whatever BSA charges which right now is $33) for all cubs. We require a parent to join from every family that has a scout. Our goal is to keep the entry barrier low.

Required sales: I know some packs in our area “require” a certain amount of popcorn sales among their members and charge a fee if the sales are not achieved. I never liked that, and our pack has never forced anyone to participate in fund raising. It just seems cringe-worthy to come to a new Cub Scout and family and say, “Thanks for joining, now go sell popcorn!” There’s a lot of great reasons to sell popcorn, but requiring seems a step too far.

Activity fees: We have special fees for certain activities that are above-and-beyond the scope of regular events. For example, we had a recruiting night two weeks ago and included a take-home mess kit, personal first aid kit, and some firestarters. We asked parents that attended to kick in ten bucks and most did without even taking a breath. Campouts? Extra costs for food and stuff, it’s never been a problem.

Nova/Supernova Fee: The Nova and Supernova program have additional expenses just in patches and awards, so we have an additional $35 fee for the first time Supernova and $25 for the second-time Supernova.

Use what works–don’t use what doesn’t.

One thing I would like to point out, not unit, Pack, Troop, Ship or Crew should EVER have separate accounts for Scouts. All money should be in a single account. Units that have “scout accounts” need to keep these accounts on paper only. The money in the “scout accounts” belongs to the Charter Org, just as all other money the “unit” has.

Scout accounts that have $ other than paid into it by the unit need to be handled carefully as there could issues with the IRS.

We do it as a part of our bylaws in our Sea Scout Ship.
They earn points for time fundraising; do the time, get the recognition by going free; don’t do the time and it comes out of your pocket.

But…

We wrote it into our bylaws.

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I’m a tax adviser with decades of experience. I cannot give tax advice here, but I can say that having Scout accounts is like playing with firecackers.

A charitable organization is exempt from tax only if no part of its earnings inure to the benefit of any private individual.

When your Scouts sell popcorn, the money earned constitutes earnings of your chartered organization. It’s hard for me to see how the use of those earnings in a “Scout account” doesn’t cause them to inure to the benefit of the Scout.

The BSA has had people look at this, and I don’t completely agree with their conclusions.

The 50% rule that some people put out there is not an IRS rule. It stems from the hopeful attitude on the part of those who concocted it. The theory is that makes the inurement of benefits to individual Scouts far less substantial.

Substantial is a funny word. It doesn’t mean the same thing to everyone. If you buy something in a store for $9.99, hand the cashier a $10 bill and watch the cashier close the drawer without giving you your penny, you might fins that insubstantial. What if the price was $9.95, and the same thing happened? At what price would it become substantial? The answer is not the same for everyone. Relying on making something insubstantial means being at the mercy of whoever will make the call on that.

The IRS information release addressing Scout accounts is available at https://www.irs.gov/pub/irs-wd/02-0041.pdf

An information release is a tool not used often by the IRS. The Service indicates it does not have enough information to issue an actual ruling. But you can see that the IRS certainly believes there are circumstances under which this would be problematic for the chartered organization. Unfortunately, the IRS does not say when it is and is not OK.

As I said above, I am not rendering tax advice here. But I am warning anyone using Scout accounts that the tax position you and your chartered organization are taking may not be on solid ground.

Yours in Scouting,

Peter

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To not have dues, our pack requires that you try to sell at least 300 dollars in popcorn sales. If you are a Lion it is not required to sell anything. Once you sell 300 then we have a Scout account. A certain percentage, I forget offhand, maybe 10 percent? goes towards the scout in an “account” that can be used for camp or anything we charge. Doing it this way, our pack is one of the higher selling packs in the council. This also allows us to make a majority of our events free or just a small cost for adults and family members. If a scout doesn’t sell, then we ask if possible for the family to pay 100 dollars. If some scouts come close to the 300 dollar limit, we don’t press it too much, since there are other scouts who sell quite a bit that can offset that. We do offer show and sells to give an opportunity for everyone to sign up and sell if they want. Anything that we off for free we offer to everyone. Understand if there are some that don’t sell very much or money is a barrier, we make an exception and not a big deal about it. It works for us, and it allows us to have a successful popcorn sale and make things low cost for families throughout the year

I have heard about this being an issue, but not for the non-profit; the argument was about whether the responsibility of the tax is assigned to the Scout.

We do it with a points system.

Each point represents a specific dollar amount and a period of time. We are careful with this method because the time element does not meet any minimum wage statute (since we aren’t actually paying them) and does not take into account any profitable action (even if we don’t break even, they get credit).

Now…

Since our current Charter Org is a for profit entity, we don’t have to worry about the whole non-profit organization issue. This will likely change once the Charter Organization changes when we recharter this year.

We will, of course, talk with our own tax professional and attorney to confirm the issue is handled. However, Sea Scouts are required to prove they’re handling their own way in the unit to meet advancement requirements.

This is timely as my unit is having the same discussion. We are considering the following plan. All scouts pay dues in the fall, ~$90. We will also have a spring activity fee, also ~$90, however scouts that met the individual popcorn goal would have that fee waived. Scouts that participated, but did not meet the goal have 1/2 the fee waived. We are still trying to answer the question of scouts joining late (Oct./Nov, after the sales have concluded).

We are a low income area so we try to keep our fees low. Each scout pays $65 at the beginning of the year - $33 to BSA, the rest to the pack to cover patches, belt loops, den supplies, camping fees and food for campouts. We have about 30-45 scouts usually throughout the year, and we do the prizes for popcorn even though we make less, because it’s a good incentive for the kids, we’ve tested, plus we do canteens for highest earner in each den. Our highest earners will get over $1000 in popcorn, but the average is about 200-300, which is really good, I feel. We were #1 in our district last year.

As for Scout accounts, we keep it on paper, but all the funds are in the pack account. They don’t get a portion of the Popcorn sales because they know it’s for the Pack, and if they want to help decide what we do with it, they come to the Leaders and Parents planning meeting in March for the next year. The scouts get 1/2 the profit from the Camp Cards sells for their account, which can be used for Day Camp, uniforms, dues, whatever Scouting related expense they choose. If they quit, it reverts back into our pack money.

We never require them to sell but we make sure they know what we use that money for. If there’s ever an event we don’t have the money for, we work up a bake sale or another fundraiser for it, or parents split the amount.

You could also make it an either or for Popcorn sales.

Either you sell $300 of popcorn or you pay dues of $100. Insert your target numbers how you see fit.

You need to be careful with this as it could be viewed as a significant individual benefit, especially since the unit profit on $300 of popcorn sales is typically $105 so the Scout is essentially earning $100 of the $105.

Well I am assuming that you are not doing individual scout accounts, which you really should not be doing anyways.

In all of the units I am involved with, if you earn or donate money, it all goes into the general fund for the PLC and Committee to allocate. Hence, we can say you either sell X, or you pay X in dues.

It doesn’t really matter if you have individual Scout accounts or allow a Scout to fundraise in lieu of paying dues. Both could be looked upon an an individual benefit from fundraising.

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So we don’t have Scout accounts, but we do have yearly dues. We do the coupon book sales as opposed to popcorn. The Council gives the pack a percentage back of all of the coupon book sales. Each scout is given that amount as a credit to their account for the books they sold. If they sell enough books the credit will cover their dues.

It is paperwork for our treasurer and coupon book coordinator, but as far as individual accounts for each scout, that sounds like a nightmare.

So your supposition is that allowing popcorn sales to apply towards yearly dues, is a private benefit to that Scout, as they are paying their dues.

It is an interesting thought. That being said, our Committee Chair is a tax attorney and has never mentioned an issue. THAT being said, he has also stated that the odds of an audit or tax action on our units of about 200 kids is exactly zero. Shrug

=D

Drew

My council recommends that no more than 40% of the proceeds the unit receives (about 35% of revenue in the case of popcorn) be credited to the Scout. Using this number, a unit would need to require about $715 in popcorn sales to cover $100 in dues.

The case described earlier was a unit requiring $300 in popcorn sales to offset $100 in dues. The proceeds from $300 in sales is about $105. Offsetting $100 in dues is 95%. This could easily constitute an individual benefit from a fundraiser.

The probability of my taxes being audited are almost 0 too, but I try to follow the law when it comes to filing and paying my taxes. It is the Trustworthy and Obedient parts of the Scout law that make me want to do this correctly.

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Don’t forget to involve your Carter Org Rep in any discussion about dues vs raising the money. Also, don’t count on getting any dues at the end of the year after the kid has been to all the fun activities.

FWIW, besides the two links provided above, here is the document referenced in the IRS Document: INFO 2002-0041.

I would suggest carefully reading Example 1 and Booster Club A’s fund raising point system and fund raise or pay policy. I only read it a few moments ago, but at this point, I can’t find a useful distinction between that and Scout Accounts as discussed in this thread. Only the BSA memo above provides a useful distinction and that is because it defines how the Scout Account is funded, not how it is used.

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Blockquote
Both could be looked upon an an individual benefit from fundraising.

By this definition, Scouting is an individual benefit.

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