BSA offers guidance on individual Scout accounts

I won’t bury the lede: Despite what you might’ve heard, the Boy Scouts of America’s rules do allow for individual Scout accounts.

But it’s not that simple. And the explanation won’t be as black and white as you’d like.

That’s because the IRS rules governing things like individual Scout accounts have a lot of gray areas. All the BSA can do is help you make sense of those guidelines.

Start by listening to the December 2014 CubCast. In it, Steve McGowan, General Counsel for the Boy Scouts of America, explains individual Scout accounts and how they fit into IRS rules.

Sales of popcorn, camp cards and the like are an important part of Scouting, McGowan says. They teach Scouts to be thrifty and to manage money. They give families who might not otherwise be able to afford Scouting a chance to experience it.

But money earned from fundraisers must primarily be used in a way that benefits the entire unit, McGowan says. The nonprofit status of the BSA and of the unit’s chartered organization is at stake.

Here’s a nice explanation from McGowan in the podcast:

An example would be if a Scout is part of a unit, and the unit raises money to offset the costs of Scouting for the entire unit. Nothing wrong with that. If they use it as a means to pay down the cost for the unit and each member to go to summer camp, nothing wrong with that.

On the other hand, when you move over to the other side, and a Scout goes out and sells a lot of popcorn, and the unit designates that money that he raises to be used only for that Scout and only for activities that benefit that Scout, we get into an issue of whether or not the IRS would consider that to be a substantial private benefit.

The IRS isn’t going to go after the typical young Cub Scout that’s selling popcorn, and it helps to pay for his uniforms or helps to pay for his summer camp. But to the extent we have people that are raising significant funds, and those funds are being used for costs that would normally be parental obligations in connection with Scouting, we’re getting into an area where the IRS has been and is paying more attention.

Transferring units

McGowan shares with CubCast listeners an explanation about Scouts transferring from unit to unit. What happens to the money raised when a Cub Scout becomes a Boy Scout, for example?

“If the unit is part of the same chartered organization, I certainly see no problem with that,” McGowan says. “The chartered organization owning both units, no problem. If we now talk about changing chartered partners, the IRS has not issued any guidance.”

Listen to the CubCast for more explanation on this subject.

What’s definitely not OK

Money raised in the name of Scouting that isn’t used for Scouting is a definite no-no.

McGowan shares the fictional example of a Scout raising money from popcorn sales and having his portion go into his individual Scout account. He then uses that money to go to Disney World.

“That’s absolutely prohibited,” he says. “Any use of the funds would have to be Scouting-related. … In fact, you can get into problems if you start taking designated funds to a lot of personal equipment that might not otherwise be unit equipment. These are gray areas, and common sense has to prevail.”

If the unit uses popcorn money to buy new tents, that’s fine. If a Scout uses popcorn money to buy a backpack and shoes for school, that’s problematic.

It all comes down to the amount of money involved and its purpose, McGowan explains.

“Johnny, who goes out and sells a couple of hundred dollars’ worth of popcorn, and he gets some credit towards a summer camp, I don’t think anybody’s ever going to complain about that young boy being able to do that or say that that’s not a legitimate purpose related to Scouting.”

An important warning

In the CubCast, McGowan shares a cautionary tale about a group that was stripped of its nonprofit exemption. It was “the first time in a long time” the IRS has done that, he says.

“That caused us to take a fresh look at the history of the IRS’s positions on nonprofits” and carefully inspect and update the BSA’s guidelines, McGowan says.

Each CubCast episode has great information, but this one is a must-listen for any unit leader involved with fundraising. To me it’s the best one yet.

I’ll warn you that McGowan uses a lot of phrases that sound vague: “gets into the realm of being allowable,” “get into an issue of” and “getting into an area where.”

But that’s intentional. As I said, there’s very little that’s black and white here. The BSA wants you to be prepared by providing you with all available facts so you can “enjoy Scouting without any problem with Uncle Sam coming to visit,” McGowan says.

With that in mind, here’s what I recommend to prepare yourself:

Two musts for unit leaders involved with fundraising

  • Must listen: The December 2014 CubCast (it’s a must-listen, but a transcript is available if you’d rather read it)
  • Must read: The BSA’s Product Sales Guide (PDF) — this August 2014 document replaces and/or updates any previous guidance

Still have questions?

Please contact your local council.

Hat tip: Thanks to Russ McNamer for additional support on this post. 

Photo from Flickr: Some rights reserved by 401(K) 2013


  1. I am saddened to see this decision from the feds. “We are the government, we are hear to help” again could never be further from the truth. One of the incentives that many units use (especially boy scout units) to get their youth sell is that part of the funds from the popcorn sale can be used to help them pay for scouting (campouts, summer camp, jamboree, etc). Do all scout troops do this? no.. Do Most, I am betting yes. How many scouts went to summer camp or jamboree because they sold a ton of popcorn? How many councils did matching funds for scouts who sold popcorn for Jamboree?
    Of course the more popcorn that is sold, the more funds are also raised for the council and scouting in general as well. Now, where is the incentive? a nerf gun or other prize might work for the cub scouts, but for boy scouts, lets face it, knowing that they can pay for camp, or jamboree, etc was a HUGE incentive, and if that is gone, where is the incentive to go and sell over priced popcorn to friends and neighbors who have already been bombarded with candy, candles, wrapping paper, magazine, casino night, and every other imaginable fundraiser for every school/sports team/church group in town?

    • I’m not sure about your Council’s popcorn plan, but our Council allows individual units to decide if they want to be a part of the “prize plan” or not. If they opt out of the prize plan, then they get a bigger percentage of the sold popcorn.

      “knowing that they can pay for camp, or jamboree, etc was a HUGE incentive, and if that is gone” is not what this article is implying.

      As far as I can tell from this well written post, Steve/Bryan is implying that a Scout paying for summer camp is probably not a problem. What would be a problem is if he goes out and purchases things like clothes, or shoes for things that are not Scouting related.

      Thanks again for the fantastic post Bryan and thank you for your input Steve.

      • from everything i am reading, it has to benefit the unit as a whole, not an individual scout. Since the scout who sells 1000 worth of popcorn would receive more benefit than the scout who sells 100 worth of popcorn, this would cause the issue. Personally, i don’t see the problem with the scout accounts. All the funds are still used for SCOUTING purposes in the end anyway. its not like the funds are used to buy the kid an IPOD.

        • Got it! You’re completely correct Drew.

          I misunderstood what they meant by, “If they use it as a means to pay down the cost for the unit and each member to go to summer camp, nothing wrong with that.”

          I took that as what you were saying about a scout using his account to go to summer camp, but it is actually saying that it would only be acceptable if the money went into a fund to reduce *all* of the boys cost for camp.

          I’m going to have to agree with you wholeheartedly then Drew!

          Although, I think a case can be made that the personal management aspects of individual scout accounts are an integral part of BSA, to be used as a teaching measure and benefit the unit and organization as a whole.

    • I’m not sure what “decision from the feds” you are referring to. Fed bashing helps no one. Unless you are letting Scout’s access the money in their individual Scout account for something that’s not Scouting-related, you should be fine.

      Note the following statement in the blog post: “Despite what you might’ve heard, the Boy Scouts of America’s rules do allow for individual Scout accounts.” Regarding your concern that “from everything I am reading, it has to benefit the unit as a whole, not an individual scout,” please note the example provided by the BSA’s General Counsel: “Johnny, who goes out and sells a couple of hundred dollars’ worth of popcorn, and he gets some credit towards a summer camp, I don’t think anybody’s ever going to complain about that young boy being able to do that or say that that’s not a legitimate purpose related to Scouting.”

      • I don’t believe the issue of scout accounts per say is the issue, its where the funds come from. If the scout/parents “deposit” monies into these accounts to pay for campouts, etc, then that’s not an issue. The issue it seems is when Johnny sells 1000 dollars worth of popcorn and Timmy sells 100 dollars. In some units, Johnny would get 300, and Timmy would get 30 dollars respectively. NOW, with this policy, they both get 0. So whats Johnny’s incentive to sell popcorn. Should it be for the betterment of the unit? of course.. but lets be realistic.. he wants to sell more popcorn so he can afford to go to summer camp/boundary waters/jamboree..

        • The blog post only references monies from unit fund raising, so the issue is fairly clear. I see no new “policy” that indicates that the boys in your example would unable to use the funds from their individual Scout accounts for camp, perhaps even pay for camp in its entirety. In fact, the BSA’s General Counsel affirms that doing so is not a problem. The problems arise when a Scout raises a substantial amount of money and the money is designated only for activities that benefit that Scout. Clearly a unit should set the expectation that a Scout who raises thousands of dollars through a unit fund raiser should expect to see the bulk of that funding landing in the unit’s general fund (otherwise you are running into the substantial private benefit gray zone). BUT, per the information provided in the CubCast and the blog above, that does not preclude the unit from designating some portion of those funds to go to the individual Scout account, which in turn could (and, per the blog post, should) be used to pay for the cost of Scouting activities such as summer camp.

        • Obviously this blog to “clear up the confusion” is not getting it done since everyone here is interpreting the answers differently.

  2. I’ve always been a fan of individual accounts. I think it’s really the only good way to do it. Perhaps we are doing something different, but how does the IRS track any of this? The treasurer and the committee have access to the information, not council, or the bank, or the CO, or the IRS.

    Is this actually a problem?

    • The problem is that the IRS can request an audit of a a Chartered Organizations books, and I believes that means that this would include the scouting accounts.

      Someone, please correct me if I am wrong.

      • Yes it would include the entire Pack/Troop/Unit Accounts in an IRS or State audit…and…yes it could be a problem in a full audit. Collectively a ChartOrg would have multiple youth groups under the same number. Collectively we could earn over the $25,000 (I believe it is) that requires a form 990 to be filed with great detail. IF they don’t hit the magic number there is very little detail (read as…no reason to look at scout accounts) unless their sole purpose was to go after Scouting.

    • Your comment is a good example for a Board of Review question: Is it ok to disobey a law you do not agree with because you probably will not be caught?

      Lead by example… Unit fundraising should be for the benefit of the group. To help Scouts buy a sleeping bag or pay for a trip… figure out another way to help them make some money and not bother with ISA bookkeeping.

    • I agree with you there is little chance this will be noticed by anyone. However your Chartered Organization has every right to audit the unit finances at anytime since you operated under the organizations tax exempt id and status. It isn’t a great idea to put that sponsoring organization at risk.

  3. Thanks for this informative look into this. I’m actually the committee member in charge of finance for two units now and as such this really struck a cord with me. Now I have a better point to use when discussing things with the committees.

    Personally I’m for having scout accounts because a majority of the scout troop I work with are low income and as such they rely on fundraising to be able to afford yearly registration and summer camp so it helps to be able to point to this amount and say Johnny has earned this much so he can go to summer camp. While we haven’t had any issues with scouts moving to different units we are aware that the money is technically the Charter Orgs and we have always been on constant speaking terms with them regarding this.

    On a side note though maybe you can help me out with something. I’ve known about the “cubcast” for some time now but never been able to get an answer from someone at national about if there is an rss feed to subscribe to that too. So far I’ve just been told to come back to the page every month or so and listen to the next one on the computer. I was hoping that there actually is an rss feed so I can subscribe to it with my podcast app and listen to it automatically with the rest of my podcasts. Do you know of anything like that?

  4. Folks, I am a CPA, and I can say first of all this is not a “decision by the feds”, or anything but the operation of tax law regarding tax exempt status. Individual fundraising accounts are not allowed in that arena. The organizations that support Scouts are “public benefit” organizations. Their forming documents, and their ability to be exempt from tax hinges DIRECTLY on this. They CANNOT directly and individually benefit any one person. It really does not matter if the funds are spent on Scouting activities AT ALL. Individual benefit occurs the moment the Scout is directly given, through a separate accounting, the monetary benefit of the unit fundraising. Any unit doing this is putting their Charter Organization at FULL RISK of losing their tax exempt status. Please don’t do this, Designating assistance based on financial need is ok, but accounting for individual sales, as if these boys are outside salesmen is an absolute violation of tax law, and if caught the consequences for your Charter Organization are FATAL. DON’T DO IT FOR ANY REASON!

    • Tax laws are a decision by the feds. It may not be a new decision, but at some point the decision was made.

      As an honest question, not being sarcastic, I would actually like to know, how are camperships handled then? It is a random donation to the council, but it goes to directly help ONE scout go to summer camp.

      Is this not the same thing? In one instance, the scout is working and paying his own way to go to camp, in the other instance someone else is donating money for him to go.

      Could a troop, in essence, setup a campership fund for anyone who sold over $500, $510, $520, etc in popcorn, and if they sell over that much, they get a certain portion of camp paid for by a random donation by the unit?

      Thanks for bringing your expertise to the table in this discussion Jesse.

      • Andrew, as troop treasurer, I have been studying this problem since August, and my understanding is that we can offer camperships from money earned with fundraisers, but we cannot tie them to participation in fundraisers. To do so would be to simply change the wording but keep the same practice as before. We can give camperships based on financial need and other things such as community service. I also think we should be careful to keep the amount of any individual’s campership below the amount where the IRS might consider it income and we would be required to issue a 1099.

    • Scoutmaster Jesse, I agree with you and I fought early on this year to get my son’s scout group to not continue individual scout accounts, but with guidance from our Council, they were given blessing to continue doing it. I think it is very dangerous ground to tread and greatly jeopardizes the church that is our charter organization.

    • thanks SM Jesse. the devil is always in the details with these things. I don’t think anyone going into this thought that it was wrong to fund raise for the whole troop or right to fund raise for a personal Disneyland trip. Everyone else is likely in the middle case: fundraising a bit of money from each scout, possibly adding up to a substantial bit of money for a whole Unit, and individuals getting ~summer camp level~ funds from it. That could be a couple hundred per scout. BUT, I’ve known scouts who personally go well over a couple thousand dollars in sold popcorn, with ~40% returned to the Unit, and the unit lets the scout keep the whole amount in a scout account. The CubCast seems to indicate that it might not be right, but the IRS won’t care about a little scout account money. I’m assuming there’s no minimum earning level specified by IRS to base that assumption on. And if a troop has a bunch of top sellers, each pulling home a thousand bucks… will accumulated unit earnings matter? I’m assuming no one actually asked the IRS for a formal opinion? If it’s questionable for (example from CubCast) a Webelos Scout to earn cash that upon bridging is transferred to a troop for use in going to summer camp, why is it any less questionable than the existing troop member earning cash by the same means for the same purpose? does the transfer make it wrong? no, the transfer makes it apparent.

      A scout is trustworthy, honest, loyal and obedient. What’s the law? Is it legal? Is it questionable? Are we deliberately trying to operate in a gray area to avoid major boat-rocking?

    • Jesse, interesting… Our HS band stopped having individual fundraising accounts this past year for exactly this reason. Evidently one of the local HS band boosters was audited or the like and they were leveed a very large fine as the funds were benefitting the individuals (band trips etc) and not the band as a whole. As a result the school district directed all the boosters to discontinue the practice now all fundraisers go directly to the band. I guess the IRS is taking more of an interest in this for it to be even raised by national and that I heard about it through another non profit org. National are somewhat off the hook as it’s the CO that is running the risk here.

  5. Our unit just started following this directive this year, and wreath sales were at an all-time low. My son is going to have to earn his way to SeaBase by shoveling sidewalks this winter…

    • I am sure you will not be the first or last.. If more units start following this policy (which i understand why they are), expect popcorn sales to go down, over all, as well as attendance in things like summer camp, jamboree, high adventure, etc..

    • Loefour,

      Technically, you son should be paying taxes from the income he generated as income. The homeowner also employs the youth and needs to but into his SS account. I know it sounds stupid to me as well. If some kid came to my house and wanted to mow my grass or shovel my sidewalk for pay, I would pay them. Why? Because they actually wanted to WORK! They also got off their butt to ask me face to face to do it. It seems that this is not being taught in the USA. The BSA has always taught “Earn your own way.” They are also other skills like communicating, handling money, contracting, rejection, and paying their own way.

      I had a scout that had 10 busted lawnmowers. He came to my house and wanted me to fix them. I told him to mow my grass. I bought him a socket set for payment. We ended up tearing the mowers apart and got 8 to work. He learned how to fix and maintaining the mowers. He sold the remaining two for scrap and reinvested the money. He sold 6 of them and bought some more tools and equipment. He ended up dragging his gear around town with his bike and an old busted cart that we fixed. He ended up with about 10-15 customers and added tilling, edging, weeding, gutter cleaning, shoveling, and painting. I thought that this was a cool thing to do as a teenager. The guy fixes things for a chain of convenience stores now. He started as a cashier and they discovered that he could actually repair things. He made himself a job.

      In the past, we had several scouts do this kind of work and got turned in to the code enforcement since they did not have insurance or a permit to do the work. Some contractor turned in the scouts. The contractor suffered since they told everybody that some man was being a bully to him and all these people refused to give the guy any business. So it blew up in his face. The code enforcer had to act on it even though he thought it was stupid.

      Equipment bought for the unit like rappelling gear or tents is bought through the unit and used by the scouts. If he uses it at home or stores it at home is another thing. Some CO’s do not have the room for troop gear or they don’t want it there to begin with.

      I hope your son does lots of work like this since you know where it will lead. God bless.

      • Technically, you son should be paying taxes from the income he generated as income opens up a personal ball of wax for me.

        Taxing anyone on anything that they earn when they are under the age of 18 *should* be illegal. Why? For the very reason we fought the American Revolution. If you are under 18, you are not allowed to vote. Therefore, if you are taxed and are not allowed to vote, it is “Taxation without Representation”.

        • Who has a boy who earns enough money to file a tax return since we are only talking less than $100 for my boys.

        • Andrew, I’m 44, can’t legally vote and pay a boat load of taxes… Yep, I’m a resident alien and follow the tax code.

        • Andrew, then you may need a new tax preparer. I worked in state treasury doing initial error auditing and don’t recall any individual state income tax return from any resident alien not receiving full refunds of state taxes. But there are a few situations where it could occur. As far as children being taxed and homeowners having to pay Social Security for the boy who mows the lawn, well you don’t pay SS for those who are independent contractors. You do have to issue a 1099 type form for anyone you pay more than $600 a year (or $ [can’t remember the amount] per quarter. The IRS keeps changing things all the time.

  6. In the Pack where I was the Treasure and I am now the Cub Master, we have not had “scout accounts” in our pack. When we talk about popcorn sales we emphasis how the entire pack benefits from everyone’s sales. We are able to keep the cost of all out activities down for everyone because all our fundraising goes into “one pot”.

  7. If a Troop has Individual Scout Accounts (ISA), how do you handle younger (usually) siblings joining the Troop and the existing member has a balance in his ISA? Our Troop uses ISAs and has in the past received funds from a Pack that follow a Scout and have transferred a balance from an older boy who has lost interest to his younger brothers.

    • The answer is to get rid of ISAs in your troop. If they are funded by money that was fundraised in the name of BSA, then it is illegal to designate the money to a specific individual. The only money that should be in an ISA should be if the parents write a check (not a donation). And frankly it’s easier for everyone if funds aren’t accounted for in ISAs anyways.

  8. So my understanding from this, is that as long as the boy doesn’t earn back a majority of the proceeds you can split the proceeds to the unit and the boy to use for scouting activities like camp registrations. You can’t give them a gift card but for a scouting purpose like camping you should be ok. Is that how everyone else understands this?

  9. I don’t t think there was ever an issue of scout account itself, rather an issue of the source of the funds – dues / parent payments vs fundraising.

    It was an interesting Cubcast. There is a BSA document that explains….The tax laws do not permit private benefit, with the exception of an “insubstantial” benefit. The IRS has classified 30 percent of the money raised as “substantial,” and less than 2 percent as “insubstantial. … Does this mean 1.9% of the monies raised can be attributed to an individual scout? And what is the classification of the 2-29% of funds raised?

    But as Scoutmaster Jesse pointed out – just don’t do it. Even if you can get away with it – we are a values-based organization and leaders should not be stressing ethics and morals to the youth and then skirting the issue behind the scenes.

    My troop would merely compute the cost for the troop’s program year and divide that by the scouts in the troop to determine each family’s share, raised by popcorn and other fundraisers and possibly writing a check for the balance

  10. ..or the youh with a cub ISA bridges into a troop…The way we ran it, if the youth left the unit for any reason the funds remained with the unit. My pack (in NY) was sued for this very reason…the family wanted the leftover $50. What saved us? (1) the policy was in writing and (2) We filed a unit money earning application – funds raised were for the unit.

  11. As a Unit Treasurer I recently brought this to the attention of my Commitee. We used to split proceeds from our Spaghetti Dinner into Scout Accounts based on how many activities each boy participated in. I told my Commitee we were no longer allowed to do that. I did have someone say “but no one will know.” My response – a Scout is Honest and I will not break the law and potentially hurt the church that sponsors us. No discussion. So the proceeds will be split equally among Scouts that go to Summer camp to bring down costs across the board.
    However, the Committee still wants to set minimum participation guidelines. From the Product Sales Guide it states “They may be used to provide finiancial assistance or awards to individuals on their level of participation genrally or in specific activities benefiting the unit”. So is this OK?

    • That is the way we do it also but we also ensure the money from the Spaghetti Dinner is similar to the popcorn sales I think as long as it is used in scouting activities and offset the cost for these for the parents it is okay. Our troop using a software program that we put the money each boy earns into their accounts as long as they bring in a receipt for the activites or the treasurer uses it at council for Camp registration and once the boy leaves the Troop absorbs the money into the general fund if they are no longer a Scout. The Troop bylaws should state this so parents cannot ask for the money because the boy leaves.

  12. I have been with a Cub Scout pack for 10 years now and we have always allotted 30% of total popcorn sold to go towards their Summer camp or for boys transferring to Boy Scouts or another Pack we would send it to that Pack or Troop for the boys. If the boy does not use it for this purpose we use the money in our general fund for the pack to use for awards, Outings and other pack activities. One of our incentives was to help up pay for a new Pine wood Derby Track which is all electronic and basically runs itself. The government is basically saying the money the boys earns from the sale of Popcorn is not really looked at unless it is a huge amount and not going towards the boys scouting activities. When my son transfers to his new Boy Scout Troop they will use this money to reimburse the parent for things like new scouting equipment, paying registration and dues, Merit Badge Books and Merit Badge clinics. He also is given the opportunity to earn more money through fundraising opportunities Our Chartered org or other community organization chooses to pay but we get a set rate ie per hour rate they worked and the rest goes in our general fund to pay for Awards, Camping equipment, Training for our leaders, and also a per mile rate for our Scout Masters gas. The money earned by Scouts should be used for Scouting activities and equipment and a lot of organizations do not always make a huge amount that would require them to file tax returns since they are also classified as a Tax exempt organization.

  13. For most packs this is not a problem, our boys sell popcorn and do other fund-raisers to go to camp and help support the pack with other activities. Unfortunately there are packs out there that don’t follow the rules and flaunt it shedding a bad light on surrounding packs and angering parents when they want to use the money for ATV’s, rifles and other things (and yes it does happen, only to fall on deaf ears to council).

  14. Has anyone ever wondered what the Girl Scouts do? I have one in each and our Council for Girl Scouts forbids Individual Accounts and believes they are against IRS rule and it was even stated recently that they don’t know how the Boy Scouts get away with it.

    My Girl Scouts have no problem selling for the benefit of the whole troop and it has never been an issue that what they earn is not going solely to them. They vote on what they want to do with their proceeds and every girl benefits, no matter how much they sold.

    I see a problem with ISAs for many reasons, but in some ways, they penalize the boys who don’t have opportunity to sell as much popcorn (at least in our pack because they are so opposed to doing any fundraising besides popcorn). Those who have opportunity to sell lots of popcorn earn more in their scout account than those who don’t and then they end up having to pay more out of pocket for their scout expenses.

    • When Girl Scouts sell cookies they earn Cookie Dough which is with council and can be used for similar stuff instead of the Troop holding it. The Girl Scout troops also have bank accts set up through council instead of being left up to the troop.

      • Not all girls earn cookie dough and each Council functions differently so I’m not sure all have cookie dough. Not sure what Council you are a part of, but until this year, our Council has not had bank accounts for troops set up through them and only this year new troops are setting up bank accounts through them and not existing troops.

        I know that Boy Scouts functions differently from Girl Scouts because we don’t have a Chartered Organization either to deal with. I like some things about Girl Scouts better…a lot less complicated than Boy Scouts.

  15. Things that benefit the troop:
    – every boy going to camp (just think how dull camp would be without the boys)
    – every boy with a full uniform (not required, but a troop full of uniformed boys sure looks sharp)
    – every boy properly equipped (ever have to change a hike plan because a boy doesn’t have foot gear fit for the trail?)
    – every boy maximizing skills (it sure is nice to have a Philmont alumnus teach everyone to bear bag)

    ISAs allow a boy to have stewardship over some troop funds so that he can have a hand in making a great troop.

  16. It may benefit the scouts to pay taxes on there earnings. Why not learn the realities of taxation early? I hate the income tax because too many people avoid paying it both lawfully and unlawfully. We are already taxed on almost everything we purchase via sales taxes. Simplify the system and find an easier way.

    • So, you report the boy’s “earnings.” For most scouts that’s a couple hundred bucks, but let’s say it was $6099 this year. Guess what? He’s not required to file. Further, being a good scout, he’s probably donated some used gear to the troop and paid for some of his training, etc … Plus there’s the capital expense (fueling the family car, etc …) that may be deductible. So even if he earned more than $6100 and were required to file, he could reduce his tax obligation to zero.

      Multiply that by the millions of ISAs. Do you really want our government bogged down with frivolous paperwork that would not result in any revenue?

      • Part of the issue is self-employment tax. Although the minimum filing requirement for wage earnings only is $6,100, it’s $400 for self-employment income. Self-employment income is what scouts earn if the money in their scout accounts is used for private benefit. It seems to me (as a CPA not having dug into the tax law in detail) that the unit could issue the scout a 1099-MISC reporting the portion of their scout account that was used for private benefit as Nonemployee Compensation. The scout would have to file a tax return and pay 15.3% self-employment tax on those earnings if his net earnings were over $400.

        I would be very interested in others’ thoughts on this. Thanks.
        Rob Walker, Troop 413, Capitol Area Council

  17. The product guide has been updated since I first read it last summer. It is now very clear on what we can do with money earned from fundraisers. I don’t see any gray area in it. I think what the blog is saying is that if you continue to put money from fundraisers in ISAs you will probably get away with it if you are careful to make sure scouts spend the money only on scouting related things. That may be true, but I have to ask: what are we teaching our scouts by trying to skirt around the law? I just think it sends the wrong message to boys we are trying to instill with character. As treasurer of our troop, I will not do anything that is legally questionable.

  18. You missed my point q. I don’t want anyone to pay the tax. However we should all play by the same rules. I think its a huge waste of time and effort if they pursue this. I’m sick of all the exceptions. The income tax is a horribly unfair drain on society and punishes productivity.

  19. In our Troop fundraisers are shared – some of the money goes to the Troop’s general fund and some of it goes to the Scout’s Scout account. That money can be used to pay camp fees, registration fees, etc. A Scout can use them to pay for uniforming, camping equipment, etc. but anything of that nature must be pre-approved by the Troop committee and after approval is given and the purchase is made a receipt must be provided before the Scout is reimbursed.

  20. If a Scout has money in his account and transfers to another unit, the money is sent to that other unit (the Scout does not get the money himself) for the Scout’s Scout account in that unit. If the Scout leaves Scouting, the Troop keeps the money. This policy is made clear to the Scouts’ parents when the Scout joins. If a Scout is closing in on aging out and has a positive balance his parents are reminded a few months ahead of time. Generally in that case the money gets eaten up by an Eagle project.

    • The way I understand the information that put out, the only time the money from a Scout’s ISA can follow him is if he transfers to another unit under the same Charter Organization. If the scout moves to another unit with a different Charter Organization, the money is supposed to stay with the first organization.

  21. Can someone ask Mr. McGowan to be more specific? For instance, currently in our troop, if Johnny sells $2000 in flag subscriptions to 60 families in his neighborhood, the troop will retain $500 for general unit purposes and pay his $1500 trip charge to attend Boundary Waters High Adventure camp. Is this legal?

  22. I became treasurer in August 2014 and was asked if ISA money could be used at a sporting goods store so “a boy” could buy his own sleeping bag. I said I’d do some research to find the answer. Needless to say…that opened up a huge can of worms. Five months later, and while we ARE phasing out ISAs, there is still a lot of confusion and discussion. My thinking is (and I’m going to bring it up at the next committee meeting) is that the committee should be the deciding body of how former ISA, and now entire troop, monies are spent.

    I’m going to recommend that a percentage of summer camp, first aid meet registration, and percentages of other selected trips and activities be paid for out of this “group fund.” Boys who do not attend will forfeit their share. A line has do be drawn somewhere and my thinking is this the cleanest way to do it.

    We are going to have to create new language to describe the benefit of selling popcorn, candy, etc. to an individual boy and his family, but I believe it can be done such that these sales continue.

    Is anyone else doing this?

    • Put it in terms of the troop paying for activities rather than what each scout owes. Our troop is selling chocolate bars to earn the deposit on a high adventure trip. Despite the fact that this will reduce the total payment for all of the participants equally, they are selling the bars even faster than they did last year when the proceeds went into their ISAs.

  23. What about Business Donations? If a Scout gets a donation form a “Sponsor” can that be applied to his individual account and still remain a Tax Deductible Donation for the Business.

  24. Since there are recognized benefits from Scouts earning their own way, “the IRS isn’t going to go after the typical young Cub Scout that’s selling popcorn, and it helps to pay for his uniforms or helps to pay for his summer camp, ” and ” the IRS rules governing things like individual Scout accounts have a lot of gray areas,” why doesn’t the BSA, in collaboration with other youth serving organizations, seek legislation exempting youth members from the “private benefit” provision up to a reasonable limit, i.e. the cost of camping experiences.

    One aspect of product sales not addressed thus far in this discussion is the prizes earned and private benefit. Prizes can be of significant value for top sellers, but they are often electronics or such which are totally unrelated to the Scouting program. I feel when folks buy popcorn or another product from a Scout, they are thinking it will support the Scouting experience, not entertainment. .

  25. If a scout moves from one troop to another, can he take the money in his Scout account (earned by selling popcorn, camp cards, etc.) with him to his new troop?

    • A scout shouldn’t have any money in his account earned from fundraisers. The only thing that should be in his account is money he paid to the troop, such as a refund for something he overpaid or money paid towards a future event. In that case it belongs to him and should be paid back to him if he leaves the troop.

  26. So somebody bottom line is for me. Question one. Can a scout participate in fundraising and have their own account from the fundraising activity Pay for any expenses they accrue while being a scout ?

    Question two Can the troop have a fundraising activity with scout participation and Then all the funds be put into a general troop account for all the scouts activities throughout the year?

    Question three can the parents of scouts participate in fundraisers and then transfer the money into their children’s own special scout account?

    Basically I’m looking for a test that tells me how far I can go with fundraising for the troop.

    • As far as the IRS is concerned, any time a person receives a benefit that is worth money, that is income. So any time a troop or pack gives a person credit for working a fund raiser that translates into a financial benefit for them, that is income, and if it is a significant amount, the IRS would expect you to report it.

      The fact is that the IRS isn’t very likely to find out about it, so some troops may continue the practice. They may also keep two sets of books just in case, or change the terminology so that it looks like the troop is giving scouts a campership based on financial need instead of rewarding them for participation in a fund raiser.

      However, my thinking is this: we are a boy scout troop, trying to instill in our scouts the principles of the the Scout Oath and Law. If we participate in something that is illegal, no matter how unlikely it is that we will be caught, what are we teaching our scouts? So, in my troop, while I am treasurer, we will follow the law.

      That means that when the troop holds a fund raiser, the money raised is for the troop as a whole. The troop decides how that money is used. It benefits all of our scouts, whether they participate in the fund raisers or not, by paying for all of their activities, so they don’t have to pay monthly dues or chip in for food at every camp out. It benefits groups within our troop, by helping pay the costs of summer camp, high adventure trips and other activities. We can also use it to give camperships to scouts based on financial need, but not on participation in fund raisers.

      This past year has been difficult as we changed our way of thinking about fund raisers, but we recently completed our big summer fund raiser, and almost every family participated, knowing that they were not going to have any money deposited into their scout account. Although I still hear some grumbling about the change, I think overall it is a better way to go than what we were doing in the past.

  27. Isn’t the Blog titled, “How four Scouts combined to sell a quarter-million dollars in Scout popcorn” inviting an IRS audit of the scouts, families, and council of these four scouts. A quarter of a million dollars is the amount that small business’s make. I say this is a great goal for the boys, but the IRS may see it differently.

  28. The Council most likely is exempt from Federal income taxation due to its status as a not-for-profit orgainzation under section 501(c)3 of the Internal Revenue Code. As long as the Council is organized in the proper way under state law and continues operating in the fashion outlined in its determination letter from the IRS, the only thing the Council needs to worry about is timely filing its Form 990. This not-for-profit status DOES NOT mean that such an organization cannot have an excess of revenues over expenses.

    Council employees are not exempt and the Council pays the employer’s share of Social Security and other Federal and state levies required by their status as an employer.

  29. The problem is that now families who do all the work (selling) expect a just reward. The family (no boy does it on his own) that sells 2000.00 of whatever vs the family that sells nothing expects that their son receive a benefit that the do-nothings don’t receive.
    We’ve entered a world where the “Scout helps the Troop go” is gone and it’s every man for himself.
    I don’t like the selfish Scout account way, but now that we’ve gone there, if you try going back you will see sales plummet as no one wants to do all the work of fundraising only to get the same thing as those who don’t.

    • In the nicest possible way, I would like to say there are some boys who do have the internal drive to sell/fundraise beyond most others. I am the mom of one such older Boy Scout who has sold well over $2000 annually. Each year he set a goal just to see if he could beat his previous number. He competes against himself; it’s just who he is and always has been. We live in suburbia and he decides which neighborhoods to go to on which days – he comes up with a strategy. For each of the last 3 years he has knocked on close to 400 doors (seriously, he keeps track) and that does not count the doors that have “no solicitor” signs. He does not take it personally when someone says “no” to a sales pitch; he just moves along. My son sees this as “thrifty.” His portion of the fundraising allows him to pay for summer camp, high adventure, uniforms, etc. AND…his sales benefit the Troop. He can talk with other scouts about being thrifty and aiming to paying their own way. He sets a positive example. The beauty of life is that we are all different and some boys will never do more than the bare minimum, some will fall in the middle, and others will sell enough to compensate for the gap. It all works out in the end when the Troop thrives and all the boys benefit.

  30. Hello All- Our Cub Pack & Scout Troop are discussing how to handle fundraising within the guidelines. My question is how do other Troops deal with raising money for big expenses such as High Adventure trips that can be $1500 per scout. In the past we had accounts for each scout and as they participated in fundraisers, a deposit was made to their account to go towards their camp expenses. We do High Adventure every 3 years so they had time to earn money towards that goal. Some families would do every fundraiser and others would write a check to pay for camp. Now how can we deal with this within the regulations? What if a scout joins the troop 6 months before an expensive camp that the other scouts have been fundraising for over a 3 year period? How do you allow for the fact that some families are willing to participate in every fundraiser and some families have other obligations and are willing to pay for their share? I know that EVERY unit is dealing with this issue- please share the solutions that you have come up with. Thank You

    • When a Scout transfers to another troop, they cannot take money with them from the previous troop that was made from a fundraiser unless its under the same chartered organization (ie, move from pack to troop or to venture at the same church).

      However, if the parent or Scout paid their own funds into a ISA then the money can be returned to the Scout or transferred—this would be in the case of writing a check for a campout, but then the scout didn’t attend…those funds can be returned to the family or sent to a new troop. But at no time can money raised in a fund raiser be allotted towards a specific Scout based on their percentage of sales.

  31. The cub cast mentions funds “used for costs that would normally be parental obligations in connection with Scouting”. Can you tell me what costs are obligations of parents? I’ve heard staff from our Council tell parents that they can have the entire year of scouting paid for by fundraising.

  32. What is the difference between the scout receiving prizes from Trail’s End for his popcorn sales vs the troop allocating a portion of the commission the troop receives to his scout account. They are both based on the individual sales and given as an individual benefit. From my point of view they are one in the same. Hard to enforce rules of the BSA that it does not follow itself.

    • The difference is that Trails End is a for-profit corporation that pays taxes on its earnings and they supply the prizes. Also the cost of prizes fall below the 2% threshold which the IRS rules as insubstantial.

      Our Committee called the IRS directly (877-829-5500) and that stopped all the barracks lawyers in the troop from spouting off in how they “think” it could be legal. Spoiler alert— it’s not legal.

  33. If the unit is part of the same chartered organization, I certainly see no problem with that,” McGowan says. “The chartered organization owning both units, no problem. If we now talk about changing chartered partners, the IRS has not issued any guidance.”
    Therefore I see no problem in transferring the money to the other Troop. That Troop can decide how it applies to the transferring Scout since from reading these blogs, Troops seem to have different ways of handling the money. As long as the money goes from one not for profit to another, it shouldn’t raise any red flags.

    • Nope— can’t transfer funds raised by one 501c3 to a different 501c3. They may both be scouting and you and I understand that they are the same, but legally the chartered orgs own the troop and are considered different tax exempt purposes. Call the IRS advice line and get the right info. They will tell you ISA funded by fundraisers are not allowed anyways so transferring isn’t even a real option.

  34. So I need to drop ISAs and keep ALL of the piddling 30% the Council provides in General funds for Camperships. Then when my 40 scouts that have sold or not sold popcorn decide to go to Philmont (just 9 of them) and they deplete the funds delegated to camping, the rest of my scouts get screwed. Next year here are no scouts willing to sell popcorn and the high adventure trips end for everyone. I have enough issues trying to get scouts to sell popcorn now, I hope he Council can survive without their 40% +.

  35. Another thought about Scout Accounts from fundraising.
    Since it is actually the Unit Sponsor that is non-profit (probably a Church), should’t all of the popcorn fundraising profit be turned into the Non-profit treasurer. Then when the nit needs to spend some money for an activity or camping scholarship, thy can ask the non-profit to supply the money. Hopefully the non-profit won’t have spent the money on something that would better the non-profit situation like paying the electric bill. The sponsor owns the unit and can decide how much and when they decide to provide monetary support for the unit. Which would you rather have a meeting place or a high adventure trip?

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