INFORMATION ABOUT EXEMPT BOOSTER CLUBS By Attorney Harvey Mechanic The 501(c)(3) organization that is a booster organization is not

for the parents or youth to fund-raise and have their efforts benefit individuals exclu ding other individuals in the sport who do not participate in the booster club a s much. That would simply be a way to get tax deductions for payments that would , otherwise, not be deductible as when there is no booster club and parents simp ly pay a gym directly. For example, parents who pay tuition to the university fo r their child do not get a tax deductible donation for those payments. Parents need to be only thinking about the benefits for all of the youth who are similar ly engaged in the sporting or cultural activity that the booster club is properl y set up to support. I have been told that one of the main purposes of youth spo rting activities is to teach youth fair play. We would expect, therefore, that parents would want to be fair and act in booster clubs according to IRS regulati ons. The main principle of funding by IRS 501(c)(3) nonprofit booster organiz ations is that the organizations may not discriminate in making grants to youth or college students on the basis of their family's membership in, or funding to, the booster organizations, or the family's fund-raising or time put into booste r organization activities. All funds solicited on behalf of the booster organiz ation in fundraisers (sales and charitable solicitations) must go into the gener al fund of the booster organization and not directly into individual accounts of the booster fundraiser. Otherwise, there will be tax issues. If the 501(c)(3) booster organization has "individual accounts" make sur e that people know that funds that are earmarked by relatives or friends who are giving their own funds to the 501(c)(3) organization and which are going into t he family's individual account are not deductible donations. The funding from th e parents and other family members or friends for the individual account are con sidered pass-through funding and not grants by the organization when given for t he use of the particular family member. These would be treated like tuition paym ents by family members to a university for the use of the family member. In denying exemption to a purported 501(c)(3) booster organization in 19 92, the IRS at http://www.irs.gov/pub/irs-lafa/den1646r.pdf on page 6 stated "The reason you were created and your method of operation indic ate that you are made up of a group of parents who have joined together to work cooperatively to provide funds to pay for the participation of their children in athletic events. The expenses incurred by these children would otherwise have b een paid by the parents. All parents of competitive team members are automatica lly members of your organization. Accordingly, members expect to receive a bene fit in return for their membership. You pay no benefits to non-members." A similar denial of exemption was issued by the IRS in 1990 and may be v iewed at https://docs.google.com/open?id=0B4xNuGSpiyzgYm1CSHRmcXNqUUU In June of 2011 that IRS wrote: ---Start of Excerpt-If a booster club confers a benefit on a participant in return for their fundrai sing activities, such as by crediting amounts raised by a participant toward tha t participant's dues requirement, or by crediting amounts raised against the cos t 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 de scribed in 501(c)(3). ---End of Excerpt--http://www.irs.gov/pub/irs-tege/booster_club_field_directive_6-27.pdf The IRS continued in the next paragraph, "It is also possible that amounts credi

ted to a participant's account due to fundraising would constitute income from s ervices, and could result in employment taxes." If you want to read more details about the issue, I suggest you read my summary of an extensive IRS discussion of booster organizations' rules that you find at https://docs.google.com/open?id=0B4xNuGSpiyzgMGVDelVFTG4zV0E Harvey Mechanic, Attorney at Law Harvey108@hotmail.com