5 Essentials for Booster Clubs to Meet IRS Requirements

The Internal Revenue Service exempts booster clubs and other nonprofits from paying taxes as long as they register as 501(c)(3) organizations. Without this exemption, booster clubs could owe 15 ~ 25% of their income in taxes.

However, this exemption has significant implications. The IRS requires booster clubs to distribute funds equally to all students, regardless of their individual participation in fundraising activities. So, is it advantageous for a booster club to register with the IRS as a 501(c)(3)?

What Should Booster Organizations Do?

Booster organizations should take advantage of the tax-exemption offered by the IRS under section 501(c)(3). The booster leader’s top financial priority is to operate in full compliance with the guidelines provided by the IRS. I am neither an attorney nor an accountant. However, I have learned these five essentials while leading a booster organization:

  1. Operate with one general fund. This is an absolute requirement. All income shall be deposited into this fund, and all expenses shall be paid from it.
  2. Do not keep records on the side. Beware of keeping records that could give the appearance that special benefit is given to any student. These records could include hours students worked in fundraisers, points awarded to students for participation in fundraisers, or credit for dollars that students brought into the organization.
  3. Keep records according to sound accounting practices. Under many funding models, families will make student payments to the organization. You must keep accurate records of all incoming and outgoing funds – that’s just good business sense. Occasionally, a parent will want to confirm that a check has been received by the organization. However, do not use these records to give preferential treatment to any student.
  4. Hire a Certified Public Accountant. I recommend that all booster organizations keep an accountant on retainer. An accountant will bring expertise to the table and will be able to steer the organization in the right direction. As booster leaders rotate into and out of the organization, the accountant will provide continuity in financial leadership. Have your accountant review the organization’s books quarterly or semi-annually, and ask her to help you file financial documents required by the IRS, the state government, and the school board.
  5. When in doubt, seek legal counsel. At times you will need a legal opinion to help determine an appropriate course of action. As a leader, your peace of mind will far outweigh the cost of an attorney’s services. Be sure to select an attorney who specializes in nonprofit operations.

Does Your Booster Club Comply With the IRS?

Do you know all of the IRS requirements for your booster club? Are you confident that your booster club fully complies with the IRS? How would your booster club fare if you were audited?

To learn all of the IRS’s requirements for booster clubs, check out my book, The Booster Leader, 35 Leadership Essentials for a Thriving Booster Organization. It will equip you to lead with confidence and give you the assurance of complying with all IRS requirements. The Booster Leader is available on Amazon in Kindle and paperback formats.

Question: What are your booster club’s best practices for complying with IRS requirements? You can leave a comment by clicking here.

Please note: I reserve the right to delete comments that are offensive or off-topic.

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13 thoughts on “5 Essentials for Booster Clubs to Meet IRS Requirements

  1. Questions:
    Can a booster club require membership dues to be paid all 4 years as a requirement for applying for their scholarship?
    Can they also be judged on fundraising input as a scholarship requirement?

    • Hello Christine,

      Thanks for reaching out! My answer is the same for both questions – no. Here’s why.

      The IRS allows booster clubs and other nonprofits to operate tax-exempt under section 501(c)(3). This section establishes stringent guidelines for nonprofits, including, “none of its earnings may inure to any private shareholder or individual.”⁠ Inure means “to become beneficial or advantageous.”⁠

      Therefore, a booster club may not allocate funding in a manner that would benefit any individual student over the other students in the program.

      Requiring payment of membership dues shows preference to the students who pay.

      I interpret “judged on fundraising input as a scholarship requirement” as the student who brings in the most funds has the best chance of receiving a scholarship. This method shows preference to an individual.

      Based on my interpretation of IRS code, I would not advise a booster club to require membership dues, or judge the amount of funds raised, as a qualification to apply for the club’s scholarship.

      Thanks,

      Dan

      Disclaimer: My response is based upon my practical experience leading a booster club. During that time, I sought guidance from an attorney with a specialization with nonprofit organizations. I recommend that you also seek the counsel of an attorney who has advised organizations that award scholarships.

  2. Can high school sports boosters, legally and/or ethically, make participation in fundraising mandatory? The booster president (in conference with the athletic director) indicates that they are allowed to make fundraising participation mandatory because “it is not illegal to deem a fundraiser mandatory just because of a 501C3 – it is within the rights of a Booster organization to say that a fundraiser is mandatory……fundraisers need to be “deemed” mandatory in order to bring in money. The monies that a Booster organization raises and maintains is clearly for the benefit of our children”

  3. We are starting a new booster club at a for profit competitive cheer gym. I have read about the gyms that have had exempt status revoked and absolutely want to avoid that.

    We have a BoD, Exec. Committee, Articles of Incorporation with our state, Federal EIN and a bank account with 2 required signatories. I am somehow – the president.

    1. Membership is not mandatory. However, can we charge membership fees? In our ByLaws we have designated associated members as everyone in the gym and active members as those who have paid to join and by that right they get voting privileges. Is that legal?

    2. In research, I kept seeing “more than insignificant percentage” in relation to IFAs and Corporate Fundraising.

    3. Are there tips to appease those parents who want all the work they do to benefit their own child?

    Thanks!!

  4. My question is related to a gymnastics “Parent Club”. This booster/parent club is a separate entity from the gym that our children compete for (501c3 vs the for profit gym). We pay our monthly team tuition to the gym, meet entry fees etc. yet, our parent club says that our children will not be able to compete unless our parent club dues are paid. Dues are $280 annually, we are required to volunteer a specified number of hours depending on your gymnasts level and we are also required to fundraise a predetermined amout of dollars. My question is, is that allowable?!? Can a 501c3 require me to pay annual dues, volunteer a minimum amount of hours, and require me to fundraise a specific amount of dollars in order for my child to remain eligible to compete. If I pay the gym for training, meet qualifications are met and I pay the meet entry fees, should a separate entity (parent club) be allowed to make an athlete ineligible?

    • Hi Jennifer,

      A booster club that is recognized by the IRS as a 501(c)(3) may request but not require student payments for participation. Furthermore, no student may be denied the opportunity to participate based on the amount of funds they raise on behalf of the booster club.

      So no, the parent club may not require you to pay student fees or work a required number of hours in order for your child to participate on the gymnastics team. However, as you mention, you will have to pay the gym for services they render as a business.

      Here’s a link to one of my posts with more information.

      Let me point out that there are many expenses involved in operating a booster club. It is okay for the club to approach parents stating that, “in order to achieve our budgetary goals, we ask each family to contribute $X and work X hours in fundraising activities.” They just cannot deny any student the opportunity to participate for not meeting these requested levels of support. With that said, I encourage you to make a good faith effort to support the booster club the best you can.

      For further clarification, I recommend you to seek the guidance of a local attorney with nonprofit specialty.

      Thanks, and I wish your children much success in gymnastics!

      Dan

  5. I’ve been reading a lot about this, but still remain a bit confused.

    We are attempting to put together a Booster Club to support Troop and Crew activities. Membership is optional. The prime purpose is to financially support scouts’ camping/activity fees.

    Can we require volunteer hours (by family) to be considered an active member?

    Fundraising activities are for specific trips (for example, summer camp). For example, money raised from January though May is specifically for summer camp. All scouts/crew members who are active members will be eligible to an equal portion of the funds received, which would be paid as a scholarship on their behalf to the Troop/Crew. The Club would also provide a limited number of scholarships to non-members, based upon financial need, as well as troop gear donations. No money goes to the family or individual scout. Any money not used would revert back to the General Fund.

    • Hello Lisa,

      I am incredibly sorry for such a late reply to your question. I have been working on a large family project, which has taken my attention away from my website.

      Here are my thoughts (I hope they’re not too late).

      When you establish a booster club for your troop, I recommend becoming a 501(c)(3) organization. This will give your club proper financial recognition as a nonprofit organization. It will also give you the opportunity to establish a clear structure to operate by (constitution & by-laws, delegation of authority, etc.).

      In a chartered 501(c)(3), all families will be considered members. You cannot require families to work volunteer hours, but you may certainly request them to. A clear explanation of the troop’s need to raise funds is often enough to get parents involved.

      I would be careful not to be a “travel agent for guilt trips,” though. Some parents simply don’t prioritize their children’s activities high enough to participate. That’s sad.

      You’re spot-on with the equal distribution of funds to all summer campers. That’s right in line with the IRS’s expectations of 501(c)(3)s.

      I appreciate your desire to offer scholarships and gear donations based on financial need. I think you need to be careful with the method you use to award the scholarships, so as not to show preference to one scout over another. You may want to seek the guidance of a local attorney with nonprofit specialty to help define a method to distribute funds.

      You may possibly advertise that the troop will award “x” number of scholarships, and accept applications for the scholarships. Then, you could draw names at random to award the scholarships.

      I hope this helps, and again, I’m sorry for the late reply!

      Dan Caldwell

  6. In regards to being a member of a club and fundraising, as long as you are a member of the club and regardless if you fund-raise or not you get equal distribution of funds but if you are not a member of the booster club is the booster club required to use funds to offset your costs? We want to make sure we are within guidelines of 501c3 status.

    • Hello Amanda,

      Under the IRS’s guidelines for 501(c)(3) nonprofits, all students are to receive equal benefit of the booster club’s funds. Therefore, all students are considered “members.”

      I hope this helps.

      Thanks!

      Dan

  7. We’re looking at applying for 501(c)(3) status for our school athletic booster club. I’m not sure which NTEE code we should use…wondered if you could offer suggestion for that. Also, I keep seeing the” (but only if none of its activities involve providing athletic facilities or equipment” statement pop up, unless you’re classified as a Qualifying Amateur Sports Organization. Part of what our booster club wanted to be able to do was to assist with equipment and facilities (repair, replacement, or purchase) if necessary. All the students of the school would benefit from this, as well as students from other areas and schools that would use the facilities. Is this going to cause our application to be denied?

    • Hello Donna,

      Your question has given me the opportunity to learn something new. When I became a volunteer/leader in my children’s band boosters, the organization had already been chartered as a 501(c)(3). Therefore, I was not involved in selecting an NTEE code. However, I’ve done a little research, and I’ve found a couple of resources that may be helpful.

      The National Center for Charitable Statistics (NCCS) gives a nice overview of NTEE core codes (click here). From that page, I downloaded their Full List of NTEE codes (Word Document).

      The NCCS site also has a resource where you can look up the NTEE codes for existing organizations (click here). Out of curiosity, I looked up the codes for several booster clubs in my hometown. I searched by school name (example: Blackman) in Murfreesboro, Tennessee for All IRS-registered organizations. Several organizations use code B1120, Education: Single Organization Support. This is the code for my children’s band boosters. I also saw a pattern of N60 series codes, which are for amateur sports organizations. You may be able to search comparable organizations in your area to find the most appropriate code to use.

      As for the pop-up message, I think you’ll be just fine. As a student support organization, you should be classified as a Qualifying Amateur Sports Organization. When you purchase equipment and facilities for all students to use, you’ll be in full compliance with IRS guidelines. The key here is that all students will benefit. The IRS does not allow nonprofits to show preference toward any single member or members (ex. – limiting use of equipment to those who participate in fundraising). I don’t see anything in your description that would cause your 501(c)(3) application to be denied.

      Thank you,

      Dan