Individual Fundraising Accounts
Parent Booster USA Policy

An individual fundraising account (IFA) is any method by which an organization keeps track or "credits" individuals for funds raised on behalf of the organization.  Organizations sometimes use IFA's to encourage participation in fundraising.  However, under IRS rules, all funds raised on behalf of a 501(c)(3) tax-exempt organization must be controlled and used by the organization (and not its volunteers) to support the activities of the organization.

PBUSA members must comply with the following rules regarding IFAs.  

Organizations with individual fundraising accounts are eligible to join and maintain membership in PBUSA only if:

1. The operation of the individual fundraising account complies with all rules and regulations of the IRS for tax-exempt 501(c)(3) organizations; and,

2. The organization's individual fundraising account policy and procedures are reviewed and approved by PBUSA. PBUSA may charge a reasonable fee to review member fundraising programs.

Definition: Individual fundraising account
An individual fundraising account is any method by which a booster club credits an individual or family for all, or a portion, of the funds raised by the individual, family or organization. Credit may be given for funds through various means, including sales of products (i.e., gift wrap, candy bars, etc) and service at organization fundraising events (i.e., car wash, concession stands, etc.).

IRS rules: Purpose, prohibited private benefit, control of funds

1. Public purpose. Nonprofit, tax-exempt, 501(c)(3) organizations must be operated for a public purpose - such as supporting competitive athletics, music education, or a public or nonprofit school.

2. Private benefit prohibited. Nonprofit, tax-exempt, 501(c)(3) organizations may not be operated for the personal benefit of their individual members, such as by providing a method for their members to earn money to support the individual or family participation in club activities.

3. Control of assets and funds. All funds raised by nonprofit, tax-exempt, 501(c)(3) organizations must be controlled by the organization itself and used to further the organization's tax-exempt public purpose. Individual members may not be in control of how funds "they raise" are spent.

Individual fundraising account rules
Organizations with individual fundraising accounts are eligible for membership in PBUSA only if their fundraising program meets the standards set forth in Athletic booster clubs: Are They Exempt?, Debra Cowen and Gerald Sack, 1993 EO CPE Text, summarized as follows:

1. Membership in the booster club is voluntary. Parents of students or athletes are not automatically made members of the booster club because their children are part of the school, gym or other activity.

2. Participation in fundraising activities is voluntary. Students and parents are not required to participate in a minimum number of fundraising activities or events to continue to participate in supported school, band or athletic activity. Organization does not engage in a "no work, no play policy."

3. Owners of for-profit schools and gyms are not voting members or officers or directors of the booster club and do not control the group's activities.

4. The booster club controls and uses all funds raised for the tax-exempt, public purpose of the booster club. Parents and students understand that all assets of the booster club, including all funds raised, must be used for the public tax-exempt purpose of the organization. The organization, in accordance with its bylaws, budgeting and voting rules, must determine how all funds raised are used. Funds may be used, for example, for:

1. Competitive team expenses such as competition entrance fees, provided all members of the competitive team are benefited equally regardless of participation in fundraising events

2. uniforms

3. hosting athletic, band and nonprofit school events

4. nondiscriminatory scholarship funds, provided that scholarships may not be based on participation in fundraising events

Funds may not be used for:

1. individual student tuition (except in the case of a nondiscriminatory scholarship fund set-up in accordance with IRS rules); or

2. to purchase equipment or materials for a for-profit gym or other entity.

5. "Credit" for fundraising effort may be given only in very limited circumstances with respect to product sales or service activities (such as selling candy bars or assisting with a car wash). Provided the organization primarily relies on donations, corporate and private foundation grants and other fundraising events, in limited circumstances money raised from the resale of products (i.e. gift wrap, candy bars) may be "credited" to the individuals involved in the sale. Note, however, that this type of activity must be incidental to the overall purpose and activities of the club, and that the club may not be set-up primarily for the purpose of cooperative fundraising.

6. Individuals may not withdraw funds as they wish. The group as a whole must determine how funds raised will be spent to support the organization's tax-exempt public purpose. Students who leave the organization can not take amounts "credited" to their name with them. The funds stay with the organization to be used for the organization's tax-exempt purposes.