Taxes 101: Setting Up Your Scrip Program Correctly

September 22, 2014
 
From time to time we encounter questions from organization coordinators and leadership regarding tax questions about scrip programs.  Unfortunately, the tax rules applicable to non-profits are extremely complex and often confusing, making it difficult for our well-intentioned customers who are trying to run successful scrip programs to be certain about what is correct.  A few published articles have added to the confusion by suggesting that scrip programs may create serious adverse tax consequences for participating non-profit organizations.  So on behalf of our non-profit clients, we enlisted the help of one of the nation’s largest and most respected accounting and tax firms to ask the Internal Revenue Service for guidance.  The result of those efforts is what is known as a private letter ruling, issued at the end of July, 2009.  In 2014, we had our tax advisors review all the information published by the IRS since the 2009 ruling, and they again confirmed our understanding.
 
A copy of that Private Letter Ruling, as well as an overview of common tax questions asked about scrip programs, is available by clicking here.  It is somewhat technical, but very readable, and I encourage you to take a few minutes and familiarize yourself with its contents.  We have a second article that is an overview of the specifics around sharing rebates with your participants, an especially important topic.  It can be read by clicking here, and I encourage you to read through that one as well.  When you are through, I’m confident that you will feel as we do – if properly managed, scrip fundraising does not violate any of the IRS tax code for non-profit organizations, nor does it expose participating families to additional income tax exposure.
 
One of the particularly exciting aspects of scrip fundraising, compared to other forms of fundraising, is that sharing a portion of the money raised with the participating families is uniquely permitted.  This is accomplished through the definition of the money raised as a rebate, and defining which portion of that rebate belongs to the family, not the organization.  Once you have defined a portion of the rebate as belonging to the participant, they can choose to either assign that portion to fees they owe their organization (For example: tuition, band camp fees, ice time, etc.), or they can choose to donate that rebate portion to the organization, and consider it a legitimate charitable contribution.  Both strategies are proven to help coordinators maximize participation, and fundraising.  Click here for a sample agreement to use when sharing rebates with your participants.
 
We have also developed several other helpful pieces of information:  
After exploring this information, if you have additional questions, we certainly encourage you to seek the counsel of your local tax professional.  You can also submit questions to us via e-mail at taxquestions@glscrip.com.
 
 
Sincerely,
 
Dan Springer
President
Great Lakes Scrip Center, LLC
 


Webinar 1


Webinar 2


Webinar 3
 


An overview of tax questions and Private Letter Ruling


An overview of sharing rebates with participants


Sample agreement between programs and participants


Frequently asked questions on tax topics for scrip programs