Have you discussed this with a lawyer? It seems like this would qualify you as a money transmitter which has very strict requirements in many states. There are restrictions on the word "bank" and how that term can be used too.
A very common practice in the non-profit world, but very much not something that is accessible to students. Most fiscal sponsors out there are very bureaucratic and not set up to handle short-term engagements like hackathons.
Just a few months ago they did bring in a new restricted ADI licensing scheme though where you can start with only $3 million and get started quicker but there are a bunch of restrictions.
If I were attempting to do a similar thing, rather than positioning the "bank" as a separate service, I'd be offering full "auspicing" as many national NGOs have traditionally done for locally-run activities, where the "bank" service is actually just automating internal financial procedures for authorising transfers of money that belongs to the incorporated body rather than accepting deposits on behalf of a separate group of people.
edit: hah, just read the comments below and this seems to be exactly what they're doing
Although the other onerous requirement for a bank is that it can't have any one owner with more than 5% shareholding (although there's a lender here that's trying to get the government to change that).
Out of curiosity, are there ever plans to expand this beyond high school?
So cool to see an alum on HN :-).
I'm not sure why the bank's tax status is relevant, since the bank doesn't own the funds. Also, most credit unions are nonprofit.
Most sponsors for high school events want to see some sort of non-profit status when giving and it takes over a year and thousands of dollars to create a new entity in the US. With Hack Club Bank, they can get set up under our parent entity in under a week.
I'm happy you were able to get your status so quickly. It took us about a year. The filing fee for the 1023 alone is $600.
The IRS has an overview of the expected timelines at https://www.irs.gov/charities-non-profits/charitable-organiz..., though they often get backlogged by months. The filing instructions for the 1023 are also a fun read: https://www.irs.gov/pub/irs-pdf/i1023.pdf
All the debit cards are pre-paid from event account balances and have a system in place to collect receipts and restrict categories that can be spent in, if needed.
We're planning on doing a gradual roll out where we can be extraordinary careful to make sure we catch all the kinks early on.
Bank accounts are treated as marketing for other financial services so you will even get free money if you open it in a bank that currently has a promotion (usually around 200 to 500 CZK - 7.5 to 20 dollars, or 5 to 12 beers).
The problem is that a personal bank account doesn't qualify as a non-profit under U.S. tax laws. So donors can't write off the donation and the kid would be assessed income taxes on the donation.
Again, you're focused on a totally different issue. There's nothing wrong with splitting costs or reimbursing a friend who bought you something.
Splitting rent or cab fare, etc. is fine, but that certainly doesn't mean a H.S. kid can receive $50k in "donations" in his/her personal bank account without worrying about the tax implications. That's the issue the OP is trying to address.
Having said that, school groups do spend money, bands, clubs and etc.... how are the others doing it successfully?
"The only person who had access to the bank account was the principal, but nobody knew where he was. 24 hours later, Jake and I were on the phone with the vice principal who was also left in the dark. A week later, the principal showed up in Tokyo and the money was still completely restricted. They missed the deadline for purchasing the flights and the trip was cancelled. What the hell happened?"
What did happen? They never really explain that.
For Kapaa High School, the money is still sitting today in a restricted bank account only the principal has access to - the trip never happened and the donors are frustrated, to say the least.
Joint business bank account at any major bank solves this. File for an llc in colorado (~$65) and open the account. Tax free, fee-free, and you can get multiple debit cards.
Sponsors for high school events also typically look for 501(c)(3) status before giving to events that benefit their community. I'm sure an LLC is a great solution for many, but there's a reason high schoolers don't already do this for hackathons.