Legal Question Of The Week - 5/2/2013
By Attorney Thomas B. Mooney, Neag School of Education, University of Connecticut
The "Legal Question of the Week" is a regular feature of the CAS Weekly NewsBlast. We invite readers to submit short, law-related questions of practical concern to school administrators. Each week, we will select a question and publish an answer. While these answers cannot be considered formal legal advice, they may be of help to you and your colleagues. We may edit your questions, and we will not identify the authors. Please submit your questions to: legalmailbag@casciac.org.
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Dear Legal Mailbag:
As with most schools, at my school I have a well-intentioned and hardworking group of parents who want to support the school in any way they can. Within the parental ranks, there are various volunteer groups and booster clubs. They generally have the best of intentions, but at times they give me fits. I recently discovered that a small group of parents affiliated with a larger group gained access to the group federal tax identification number. These parents opened up a bank account with a different name and are conducting fundraisers without input from the main body. Is this appropriate under IRS guidelines? Better yet, is it legal? Help me!
Signed,
In Need of Some Cents
Dear In Need:
The most important thing here is to be sure that the smaller group of rogue parents has not taken these actions for their own personal gain, as that would be a criminal offense. Even if they are acting in good faith in “helping” your school, they are engaged in a dangerous activity. A federal tax identification number is issued to identify a specific person or entity. Expropriation and use of that number without authorization may constitute fraud, and the group could risk prosecution for such fraud. In addition, the Internal Revenue Service, which of course would not look kindly upon any inappropriate use of a tax number, may find that any funds that they raised using the federal tax number without authorization is ordinary income, on which these parents will owe taxes and be subject to penalties. In addition, the donors could be denied a charitable contribution deduction. Good intentions are no shield from IRS requirements, and you must throw a net over these people for their own good.
The "Legal Question of the Week" is a regular feature of the CAS Weekly NewsBlast. We invite readers to submit short, law-related questions of practical concern to school administrators. Each week, we will select a question and publish an answer. While these answers cannot be considered formal legal advice, they may be of help to you and your colleagues. We may edit your questions, and we will not identify the authors. Please submit your questions to: legalmailbag@casciac.org.
_____________________________________________________________________________
Dear Legal Mailbag:
As with most schools, at my school I have a well-intentioned and hardworking group of parents who want to support the school in any way they can. Within the parental ranks, there are various volunteer groups and booster clubs. They generally have the best of intentions, but at times they give me fits. I recently discovered that a small group of parents affiliated with a larger group gained access to the group federal tax identification number. These parents opened up a bank account with a different name and are conducting fundraisers without input from the main body. Is this appropriate under IRS guidelines? Better yet, is it legal? Help me!
Signed,
In Need of Some Cents
Dear In Need:
The most important thing here is to be sure that the smaller group of rogue parents has not taken these actions for their own personal gain, as that would be a criminal offense. Even if they are acting in good faith in “helping” your school, they are engaged in a dangerous activity. A federal tax identification number is issued to identify a specific person or entity. Expropriation and use of that number without authorization may constitute fraud, and the group could risk prosecution for such fraud. In addition, the Internal Revenue Service, which of course would not look kindly upon any inappropriate use of a tax number, may find that any funds that they raised using the federal tax number without authorization is ordinary income, on which these parents will owe taxes and be subject to penalties. In addition, the donors could be denied a charitable contribution deduction. Good intentions are no shield from IRS requirements, and you must throw a net over these people for their own good.