This article specifically pertains to 501c3 organizations
A program leader in Florida asks, "... is there any way for the board member children to get discounted tuition?" I hear this question frequently especially considering that nonprofit board members volunteer their service to the organization and often do a lot of the day-to-day work as well. Do they really have to pay for their children to attend as well??
First off, I'd like to say a big THANK YOU to all of you out there serving the families in your organization with very little thanks or reward. YOU are making a difference and your hard work is valuable. I, too, volunteered my time, energy, and a good portion of my sanity to the homeschool program I work in for many years. Many participants aren't aware of how much it takes to start and run these programs. Would they help more if they knew? Maybe. Probably not. 😊
You really should get paid for that...
I am now an employee, but when I was a volunteer, I heard a good deal of, "you do so much, you really should get paid..." Easier said than done! And when you get paid, strings are attached. Volunteering can be hard work, but the commitment and standards are also (usually) very low. After all, if you criticize a volunteer too much, it's no skin off their nose to quit! When you come on as a paid employee, all of the sudden, there is a keen awareness that you are getting paid for your work and the pressure is on to meet or exceed expectations of your employer. In short, getting paid may not be all it's cracked up to be (and to be honest, it's not easy to "just get paid"--the organization would have to become an employer, which is a lot of work, too).
Keep in mind, we are talking here about DISCOUNTS. Appreciating board members (or other volunteers) with cash or gift cards is a slippery slope and should be avoided. See the bottom half of this IRS article.
You shouldn't have to pay tuition with all you do...
It's true. You shouldn't. Someone, please tell the IRS. 😊
According to the IRS, "to be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual...The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual."
So...in everyday language, the money generated by the 501c3 cannot go to benefit an individual. If an individual is given a discount, the IRS considers it taxable income. However, there's this little caveat about de minimis fringe (aka. "insignificant") benefits that may apply. ANY discount given would need to go through an unbiased and standardized determination process AND, the discount to the individual would need to be insignificant. And no, of course, the IRS does not define insignificant for you. HA! That would make it too easy!
To get to the point, you technically could give a discount to your board members if there was an unbiased, standardized way to make that decision. The board deciding to give themselves a discount is not unbiased. You would need an outside committee to make that decision. Perhaps a group of parents in the program (or the program membership body as a whole) could be asked to make this determination for the board? You also may consider adding that determination to the bylaws once it is made. But keep in mind, the benefit should be insignificant. I have linked a few articles below that talk more about that, but in general, if a board member is volunteering 600 hours a year and they receive a $300 discount on tuition, that works out to $.50 an hour. That seems pretty insignificant to me.
I have also seen where the board as a whole does not receive a discount, but the board votes a discount for one or two members of the board who put in the majority of the work (often the President and Treasurer). As long as you have three other unbiased board members to make that decision, then this scenario could work.
I hope that helps. There are many other facets to this question including giving discounts to employees. That's a blog post for another day. 😊
Is all this IRS talk overwhelming? Book a consultation with me and I can talk you off the ledge. 😊