Jackpot eluding Bavarian
People who have enjoyed playing bingo at Altoona’s Bavarian Aid Society were dismayed to learn that the bingo would be shut down – temporarily or permanently, effective after the Nov. 11 session – because of concerns tied to the Internal Revenue Service.
However, simple solutions seem available. The question is whether Bavarian officials will choose to exercise one of them.
It is money generated from non-member bingo players that has caused the issue with the IRS to evolve.
Bavarian officials are right in trying to quickly head off a serious problem with the federal tax agency, although it isn’t clear yet whether the society plans to opt for one of the obvious remedies or a remedy less obvious.
The obvious remedies to keep bingos operating are limiting the number of nonmember players, or not permitting nonmembers to participate.
Under both scenarios it’s likely the society would lose some players. The big question is whether the number of players lost would make it impossible to continue paying meaningful prizes and jackpots.
According to IRS rules for social clubs, at least 70 percent of revenue must come from club members, and such clubs are allowed to earn no more than 15 percent of gross receipts from nonmembers.
As long as the guidelines are followed, tax-exempt status presumably will not be jeopardized.
Apparently, Bavarian officials, having received an alert from the IRS, are now fearful that their club’s tax-free status might be in jeopardy, and they are wisely choosing not to butt heads with the tax agency.
Meanwhile, society officials claim they were aware of the developing situation prior to the alert and were pondering possible responses. It’s puzzling why, after holding bingos for many years, officials allowed the current situation to continue to evolve.
Instead of stressing to nonmembers the importance of joining, they attempted to bolster the popularity of their bingos without taking adequate precautions to avoid what now has occurred.
A major membership-building effort is in order. It’s reasonable to deduce that people with the money to play bingo also have enough money to become members.
Regardless, some people who have patronized the society’s bingos, either as members or nonmembers, are no doubt angry that the IRS has put Bavarian Aid in its tax-compliance cross hairs.
Many of those players, no doubt, would rather see the IRS devote more time to scrutinizing wealthy individuals and businesses who pay few if any taxes despite lucrative salaries or business profits.
But it’s also true that tax laws must be enforced, or those laws shouldn’t be on the books.
Despite the inconvenience and unhappiness it is causing, this IRS scrutiny will benefit the society over the long run. The current scrutiny might eventually prevent a serious confrontation that could endanger the society’s existence.
Other nonprofits should take note of this Bavarian Aid concern and how the society works to resolve it.
The goal for Bavarian Aid and all other nonprofits must be to operate within the tax laws and not provide an opportunity for the IRS to yell “Bingo!”