Tax Exempt Status – The Time has Come for Booster Groups

In times of shrinking resources, booster groups are exploring grants and private donations to assist with funding student activities and athletic programs.  To qualify for many grants and to attract private donations, booster groups must obtain tax exempt status.  To do so, the booster groups in your District may approach the Board to request that the District create a central organization for all District booster organizations in order for them to obtain a group tax exemption from the IRS. 

Before considering such a request, first determine the current relationship between the booster groups and your District.  Booster groups are not comprised of District students, but rather, adults, parents and/or community members.  These groups may raise funds and donate these funds to the District or purchase items with their funds for donation to the District.  They are not legally considered a part of the District.  Many of the booster groups have not applied for or received non-profit status and do not have their own tax identification number.  Therefore, the IRS may not recognize them as official entities. 

With the above in mind, the IRS guidelines require a central organization and its subordinates to have a defined relationship.  The subordinates must be subject to the central organization’s general supervision or control.  This relationship does not exist between most School Districts and booster organizations.  School Districts and booster organizations do not have similar structures, purposes or activities.  In contrast, a typical example provided by the IRS is that of a national fraternal organization which serves as the central organization for the several state and hundreds of local chapters of the fraternal organization (i.e., Knights of Columbus, Rotary Clubs, Lions Clubs, etc.). 

Although the District could create a separate 501C3 organization to serve as the central organization, the preferred course is for the separate booster groups to join together to create the central organization without District involvement.  This maintains the separation and independence of the booster organizations from the District.  By joining together to create the central organization, the booster groups would realize the same savings in pursuing the group tax exemption.  Since the District is not involved, it would not be subject to the IRS filing requirements for a 501C3 organization.  Failure to electronically submit Form 990-N (the “e-Postcard”) for three consecutive years will result in the revocation of the organization’s tax exempt status.  If the booster groups are concerned about these responsibilities, another alternative is to become affiliated with either a state or national booster organization which already has IRS recognition as a 501C3 central organization.  Again, this approach would result in the same benefit to the booster groups and maintain the independence of the organizations from the School District. 

In conclusion, it is not recommended that School Districts serve as the central organization for subordinates consisting of booster groups.  Although School Districts could facilitate and/or participate in the creation of a central organization to pursue a Section 501C3 exemption for the booster groups, the preferable course of action is for the individual booster groups to join together to create a separate entity and thereby benefit from the group tax exemption.  Alternatively, this could also be accomplished with the booster groups affiliating themselves with existing state or national organizations which already have Section 501C3 status as a central organization for other booster groups. 

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