Today TaxMama hears from Betty who tells us. “I belong to a non profit organization that sponsors scholarships for student members. The board of this organization voted to give a “gift” (not scholarship) to two student members of the organization who have not achieved the 3.0 GPA required for scholarship awards. Can this gift be given without jeopardizing the non profit status of the organization?”
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Dear Betty
That’s a very wise question.
It’s generous of the Board to care about the students.
But if there are specific guidelines to qualify for the scholarships, and they didn’t meet them, you are diluting the value of the grant and you are setting precedent for others who can insist on getting the same benefit, whether they deserve it or not.
As to losing your tax status?
You’ll have to look back to the specific guidelines you submitted to IRS to establish your organization. You may be able to vote on amending those guidelines for specific situations – and define the situations where you will reduce your standards.
I don’t believe you can simply gift out the funds. You will probably have to add an amendment to your bylaws or qualifications.
You may want to consult with Sandy Deja
https://www.form1023help.com/
And remember, you’ll find answers to lots of questions about gifts and other tax information, free. Where? At TaxMama.com
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