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Astrospheric Sky Forecast5.15.2026 - Email from Maureen to Steve
4.16.2026 - Email from Steve to Maureen
4.14.2026 - Phone call between Steve & Maureen
5.15.2026 - Email from Maureen to Steve
Steve,
Sorry for the delay. It was an interesting topic on which to come to good answers for your group.
Please review. If you would like me to make suggestions on the Star Party Pricing/Donation Policy ) let me know.
Issue #1 - are any of the star gazing parties, whether for non-profits, government or for-profit businesses, generating unrelated business income (UBI) that is taxable (UBIT)?
There is a 3-prong test and the star gazing party would generate UBI subject to taxation if it meets all three of these test prongs:
- It is a “trade or business;”
- It is “regularly carried on;” and
- It is “not substantially related” to furthering the exempt purpose of the organization.
Each prong has its own definitions developed over the years by the IRS and the courts. If a 501(c)(3)’s proposed venture meet all three tests according to these established rules, there is UBI and MHAA will have to pay the unrelated business income tax. As we discussed, star gazing parties could be considered a trade or business, however, there are 2 areas that make a difference for MHAA. One, is that there is a Volunteer Labor Exception. The “volunteer labor exception” relates to the first prong of the UBI test; that is, whether there is a “trade or business.” If “substantially all the work in carrying on such trade or business is performed for the organization without compensation,” then you don’t have to worry about the next two prongs of the statutory test. Internal Revenue Code section 513(a)(1). In addition, the star gazing parties ARE substantially related to furthering the exempt purpose of the MHAA. Conclusion is that UBI is not an issue for your organization.
Issue #2 - what are the obligations of MHAA to report to the various persons and entities contracting for star gazing parties taking into consideration the FMV of the party services vis-a-vis the fees paid by the person or entity?
First discussion. What is FMV for star gazing parties? The IRS requires MHAA to determine FMV. This is a combination of the value of the time of the volunteers (the IRS says you make a good faith estimate of what would it cost to hire an astronomer for the hours needed in the locality where the services are being provided, including travel time) plus the "rental" value of the equipment used (if you had to rent the telescopes for the event rather than bring those already owned). If there are other elements such as hand-outs given, those should also be valued for the number needed. Finally, a reasonable "overhead" charge for time spent in arranging for the party, post-party receipts, etc. should be added. For many charities, a reasonable administrative overhead allocation is 10 to 15 percent. This means that the FMV of each party will be a function of the number of astronomers, telescopes and other materials, if any, provided, plus an administrative overhead allocation. For purposes of receipts or invoices, it is best to simply state the FMV of the party is X. Any language indicating a "rental" of equipment may require sales tax collection and payment. You are using a theoretical rental value for the telescopes to determine FMV.
A. When a charity or any other entity or person hires MHAA and pays more than $75 to MHAA for the party, MHAA is required to provide a written disclosure (whether an invoice or receipt depending upon when payment is made [known as a split receipt]) showing the amount, if any, over the FMV, as a donation.*[however, see Issue #6 below]. If the amount paid is less than $75 for the services, no receipt is required. If the amount paid is over $75, but less than FMV, the value of the services provided should be stated in the receipt/invoice.
B. When you provide a free service to a charity, government, etc. without payment, there are no required receipts to be given; however, MHAA should track the number of events it provides for free, and the FMV of the services provided, the number of attendees reached and perhaps the demographics of the audience to be able to use the data for future grant applications and solicitation materials.
Issue #3 - Penalty
A penalty is imposed on charities that do not meet the written disclosure requirement. The penalty is $10 per contribution, not to exceed $5,000 per fundraising event or mailing. The penalty may be avoided if the charity can show that failure to meet the requirements was due to reasonable cause.
Issue #4 - Deposits and Cancellation Fees
Unless you want the bookkeeping chore of taking deposits and tracking them, it seems hard to have a cancellation fee that you can enforce, so I would recommend keeping the no deposit, no cancellation fee at this time. If there begins to be abuse of the astronomer volunteers with late cancellations, you may want to take a fairly nominal deposit (to be applied to the party cost), or applied to a cancellation occurring less than [24] hours before the scheduled time, or refunded if otherwise cancelled within thirty (30) days.
Issue #5 - Donations of Cash (check, credit card, etc.) or In-Kind of $250 and Over.
The IRS does require MHAA to provide a written receipt for any donation of $250 or more - this applies to all donors (corporate and individuals and not for profit entities). The difference between this point 5 and the point 2A above, is if the donation is a straight donation of cash or in-kind items valued at $250 or more and not donations combined with the star gazing parties, no receipt is required unless the donation is at least $250. If combined with other services, donations of more than $75 must have a receipt/invoice.
Issue #6 -Business Expenses vs Donation
As drafted, your current Policy says the price paid by for-profits and certain not-for-profits who have budgets is not a donation, but a business deduction or expense. The policy says that even if paying more than the FMV, since the price is negotiated, there is no donation, only a deductible expense, and therefore no IRS implications (no need to send a letter acknowledging any part of the price is a donation).
Let's discuss. First, MHAA is free to charge different prices to different groups as long as it is not discriminating on the basis of any recognized discriminatory classes (race, age, sex (including pregnancy), sexual orientation, gender identity, religion, disability, marital status, and veteran status). In a way, this supports the Policy of negotiating a fee with the for-profit entities or individuals.
The issue is that business expenses vs charitable deductions are not the same for a for-profit business under the IRS rules. An item that is classified as a business expense can be deducted by the business differently than an item classified as a charitable donation. Determining which is which is a bit complicated, but as noted above, per the IRS, it is the charity that has to say whether the amount paid is a partial donation based on the FMV of the services provided vs the amount paid by the business.
The business may want to make the argument that the star gazing party is "entertainment" or "advertising or marketing" for its business and therefore a deductible expense (to the extent entertainment, marketing or advertising is deductible under IRS Rules).
Advertising and Marketing: Under certain conditions, a business may deduct what would appear to be a charitable contribution as an advertising and marketing expense. For the expense to be classified as an advertising expense, the business needs to substantiate that it received something in return (a direct benefit), so the cost can be classified as an “ordinary and necessary business expense.” Here, depending on the purpose of the party and attendees, there certainly could be a direct benefit.
Entertainment: If the expense can instead be classified as entertainment, it can also be deducted. The business must maintain adequate records that include (1) the amount of such expense or other item; (2) the time and place of the travel, entertainment, amusement, recreation, or use of the facility or property; (3) the business purpose of the expense or other item; and (4) the business relationship to the taxpayer or persons entertained, using the facility or property, or receiving the gift.
Since MHAA does not want to be making the determination for the businesses whether or not they have satisfied the IRS criteria set out above and therefore have a deductible business expense, MHAA should continue to issue its receipts or invoices noting "MHAA is an IRC 501(c)(3) charity, EIN # _______________. Any amount over [$X -the FMV] may be deductible as a charitable donation to the extent permitted by law. Please consult your tax advisor."
Issue #7 - MHAA Recording of Donations and Revenue
To remain a public charity (and not be reclassified as a private foundation), MHAA must continue to show public support. When MHAA issues a split receipt, it would record the portion that is a contribution as "donation" and the portion that is FMV for services as "Program Revenue". As the organization grows, it is important to show contributions/donations and not just program revenue. Accurately reporting the portion over FMV as a donation will be a long-term benefit.
This is a lot to digest; please feel free to schedule a call with me to discuss any nuances I may have missed.
Maureen
Maureen Crush, Esq.
Counsel
Crush & Varma Law Group P.C.
15 Matthews Street
Suite 301
Goshen, N.Y. 10924
P: 845-615-9010
Firm: www.cvlawgroup.com
E-mail: maureen@cvlawgroup.com
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4.16.2026 - Email from Steve to Maureen
Thank you again, so much, for your time.
I attached the document I mentioned from our VP, Michael Goldstein. One of the debates was about the way the club worded the donation aspect when it comes to being asked about the price for us to do something like a birthday party we would be willing to do for free as part of our mission. We would tend to say there is no charge/fee and any amount given was often called a straight-up “donation”. To his mind suggesting it’s 100% deductible would not be accepted by the IRS thus risking fines, penalties to donors, and possibly our 501c3.
He wrote the attached document in "his voice" to try to define a standard going forward on how to treat the three types of entities. He has some prior history working with a different non-profit and has been an MHAA member for a few years now. He tends to be steadfast in his interpretations even when challenged with a different interpretation. But of course, no one involved in the debate holds a law degree, so the impasse rarely ends in a new mutual understanding by one or the other debater.
Feel free to correct or comment on anything stated as a truth in the document that is or sounds wrong. I make no judgement about how much, if any, of his interpretations are accurate or not and we welcome all input, warnings, and suggested improvements you may have to offer.
Also, if you are ever interested in having a stargazing event for you, your family, son's birthday, etc. big or small, let me know and we'd be happy to do that for you!
Thanks,
Steve Dittmar
MHAA President
4.14.2026 - Phone call between Steve & Maureen
On 4.14.2026 Steve Dittmar had a phone call with Maureen Crush, a non-profit lawyer connection made through friends who worked with her while she was on the board for other local non-profits like the Children's Home of Poughkeepsie.
The following basic questions and answers were covered, but the full recording is above.
- Services offered to for-profit entities in support of their customers would list our invoiced costs as a business expense, payments to MHAA would not be tax deductible.
- Programmatic services are still not taxable if you're doing your programs. It doesn't mean you have to pay tax just because you're getting paid to do your programming, but there may be a line.
- Not a problem if you cross that line, just means you might have to file an extra page for taxes like a 990-EZ to report the little bit of money that was "unrelated" income.
- The balance is if the portion of the corporate work you have to file as unrelated income starts making you more revenue than the non-profit and individual entity donations do, then the IRS might say you're making more money from your unrelated business so you can't be considered publicly supported.
- Grants, donations, support from other charities would be ways to bring up that publicly supported side of the balance.
- If set a FMV at $50 per astronomer, you can still invoice them for a larger total (say we agreed on $600) and everything beyond the $50 (i.e. $550) is the deductible part.
- We are by definition a membership corporation and thus money raised through services and donations can be used to pay for member events like picnic, etc as part of the benefits of being a member.
- All of our paying members are able to vote on leadership appointments and things like raising the price of membership dues, not just decided on by the board etc. This is a basis for saying we want to have an event for our members, this is why we exist. We exist for these members to provide outreach services. They are paying their dues and expect to get benefits. If they were just people "called" members that don't get to vote on things we wouldn't qualify as such.
- Keeping members engaged, encouraging them to continue volunteering, etc counts as supporting your mission of outreach.
- Can reimburse volunteers for things like gas if we wanted to, but the rate for charities to cover mileage is only 14 cents per mile. But if you reimburse for other things, have to file 1099 at end of year and taxes are filed for each person etc.
- Could do discounts on membership if you volunteer at events to avoid the 1099 stuff, but the sensitivity is potentially the imbalance of money sources as that would further reduce membership dues which are on the "publicly supported" side of the revenue balance.
- Selling merch etc on the website can be a headache. Could setup an Amazon store for custom shirts etc orders. We get some little bit of money, but no need to put capital up for variety of sizes etc. Can count items that are related to us and our outreach subjects as tax exempt income, but if we sell unrelated stuff like candy bars you'd have to pay taxes on it (can still take a deduction on the cost of purchasing those unrelated goods).
- Concept of "donate x and get a free shirt" instead of "buy a shirt for x" can sometimes be used, but often there's a limit to how valuable the free item can be.
- For the award banquet, no need to explicitly have a topical presentation. It's a celebration and recognition of the success of the mission and contributors to it etc.
- Could charge more than the cost and everything above cost would be donation they could write off. Not a problem to subsidize the members costs.
- Maureen will follow up about the programmatic costs to for-profit events and if we can consider that non-taxable or would only be able to write off the expense to us of it (which if free would be 0 unless we opt to give volunteers a stipend for showing up).
- Maureen also going to see if anyone at the law firms in the area might be interested in being on our board and able to be our legal advice source in future.