|Author/s||John L. Cooley|
Q: My school requires every parent to volunteer 30 hours per year. If they do not want to volunteer, they can pay $300. If they do not volunteer all their hours, we charge them $10 per hour for the hours not volunteered throughout the school year. Is there any legal reason we need to be aware of or other concerns with this practice?
A: There are several levels of analysis to this question. For example, if the parent does not volunteer and pays the school up to the $300.00, the parent cannot consider this as a donation. The school cannot issue a receipt as a donation for any amount, up to the $300.00. The payment in lieu of volunteering is not a gift, as defined by the IRS, and thus, not a donation.
The next issue involves whether the requirement of a payment from a parent who does not volunteer constitutes income to the school. In this case, it appears that the parent is trading the volunteering (service) in lieu of a direct cash payment. This is a type of bartering arrangement. As such, the value of the service provided ($10.00 per hour) is income to the school, the same as if the parent had paid the $10.00 per hour. However, since the school is a nonprofit, there is no tax consequence to the school. However, unless the school is exempt from filing a tax return, the value of the volunteering likely needs to be reported as a part of the school's total income.
The last issue relates to the question of whether the parent is trading service for the requirement to pay the school, and as such, is bartering the "volunteering" for reduction in required payment. Under this scenario, it appears that this is the case and thus, the value of the trade also constitutes income to the parent. If so, there is a tax consequence to the parent. Accordingly, the school should report the value of the service to the parent on the appropriate 1099, issued to the parent.
This entire area of bartering and trading "volunteering" instead of a required payment is a complex area of tax law. As such, the school should consult further with a specific tax attorney or CPA familiar with bartering requirements.
[Editor's Note: Beyond issues of bartering, schools need to take notice that they may inadvertently turn the parent into an employee, which brings with it workers compensation insurance coverage, minimum wage concerns, labor laws, and tax concerns.]
Notice: This article is designed to provide accurate and authoritative information in regard to the subject matter covered. It has been provided to member schools with the understanding that ACSI is not engaged in rendering legal, accounting, tax, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Laws vary by jurisdiction, and the specific application of laws to particular facts requires the advice of an attorney.
Association of Christian Schools International