That is not necessarily true. It all depends on what type of fundraising you do and how you process the funds. The one and only caviat is that you cannot refund more than they paid. This is especially true for HS age players.
Yes, the org can pay the hotel bill directly and many hotels are happy to work that way with you. There are other logistical issues that arise with that, but nothing that can't be easily handled.
The 501(c)(3) status does effect how you distribute funds that have been raised through an organization sponsored fundraiser. Team and individuals can fundraise all they want as long as the money doesn't flow through the org account(s). Car washes, football squares, etc.. can all be done by the teams and those funds would fall outside of any guidelines as long as it is handled by a parent that is not a coach or org board member. You also have to be careful on how you advertise the fundraiser, the IRS can be pricks.
Hope this helps.
Question
I am currently the head coach of a select travel baseball team in Texas. We are recognized as a 501c3 and I have a question reference an issue that currently happened. The parents of the baseball team conducted a fundraiser by selling ads as well as a bucket brigade (collecting donations at the corner of a public street). The general public was told that the money was for the non-profit/baseball team. We competed in a baseball tournament and have a remaining balance. Some of the parents are leaving the team and are demanding that I refund any money left in the bank account. I am under the belief that I cannot give money that was raised through a fundraising effort (used to raise money for the non-profit organization) to individual parents. The individuals who purchased the ads are receiving a tax benefit and I believe that the distribution of money to the parents is not appropriate.
Answer
You are 100% correct. Parents may not receive distributions from the money that was raised from persons other than the parents. If they did receive distributions that would mean that the organization would not be qualified as a 501(c)(3) organization, but would be a "cooperative" operation.
From:
www.irs.gov/pub/irs-tege/booster_club_field_directive_6-27.pdf
---Start of Excerpt--
If a booster club confers a benefit on a participant in return for
their fundraising activities, such as by crediting amounts raised
by a participant toward that participant's dues requirement, or by
crediting amounts raised against the cost of a trip, the booster
club is providing a private benefit to that participant.
Consequently, such practices could result in the organization
failing to be described in ? 501(c)(3).
---End of Excerpt---
The IRS continued in the next paragraph, "It is also possible that
amounts credited to a participant's account due to fundraising
would constitute income from services, and could result in
employment taxes."
