School Fundraising – Resist the Urge to Earmark

There are numerous charities established to raise funds to support the extra-curricular activities or tuition of students.   In most cases, parents and students help raise funds by volunteering their time (e.g., working at concession stands, selling coupon books or candy, ect).   In order to be fair to those who volunteer, there is often an urge to earmark the funds raised to those students who volunteered (or whose parents volunteered) to be available by those students to pay for their extra-curricular activities or tuition.   However, as the charity discovered in PLR 201130012, such earmarking results in an improper private benefit that resulted in revocation of tax-exempt status.  Therefore, charities formed to raise funds for students must resist the urge to earmark funds for particular students and instead are used to benefit a broad class of students.

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