Frequently Asked Questions:
How does Parent Booster USA (PBUSA) provide immediate federal - 501(c)(3) - tax-exempt status to booster clubs?
PBUSA has a group letter ruling from the IRS, which means that PBUSA has been authorized by the Internal Revenue Service (IRS) to grant federal, 501(c)(3) tax-exempt status to all of its member booster clubs -- school PTOs, athletic, music, academic and other booster clubs. See also How PBUSA Works.
Are Parent Booster USA members automatically exempt from sales tax?
Federal tax exemption, obtained through membership with Parent Booster USA, does not include state sales tax exemption. To obtain sales tax exemption, organizations generally must first be recognized as 501(c)(3) organizations, and then apply to the state for sales tax exemption. Links to get you started have been provided under the "Sales Tax" tab to the left.
Should our booster club be incorporated?
We generally recommend that booster clubs incorporate as a nonprofit corporation in the state in which your group operates. Incorporation provides liability protection and often gives groups more credibility. See also About Incorporation.
Do we need an attorney to incorporate?
Most states provide fill-in forms to assist organizations to incorporate. However, it is important for nonprofit organizations to include language required by the IRS. See also About Incorporation.
What should we do if our booster club has not filed a tax return?
PBUSA cannot provide legal advice, however we are aware that booster clubs in this situation sometimes:
(1) file the back returns and prepare to request abatement of penalties and taxes for the late filing; or
(2) incorporate and obtain tax-exempt status for a new booster club and begin filing tax returns for the new entity.
Filing back tax returns often, eventually results in the IRS assessing penalties and interest for the late filing of the returns. Frequently, however, the IRS will abate or forego the penalties and interest if a valid reason is provided. PBUSA can refer your booster club to our legal assistance program if help is needed.
IRS rules provide that any organization, business or individual that has gross receipts or income of $5000 or more file a tax return. This means that if your booster club raises $5000 or more per year, the organization should be filing a tax return. Organizations that are recognized as tax-exempt file the appropriate IRS Form 990, regardless of income, which exempts these organizations from paying tax on annual net income. Many volunteer-led school booster clubs are unaware of these IRS rules and as a result have failed, in the past, to file tax returns.
Does our booster club need insurance?
PBUSA recommends that booster clubs purchase insurance if your group can afford to do so. Frequently the insurance of the school or other group that your booster club supports will not cover the liability of the booster club. See also Risks and Insurance.
Our booster club uses Individual fundraising accounts through which we give credit to the parents and students that volunteer or otherwise participate in our fundraising programs. Are individual fundraising accounts legal?
The IRS generally finds that individual fundraising accounts set-up by booster clubs are not legal. See also Individual Fundraising Accounts .
How much control should the school have over the activities and financial affairs of our booster club?
To be effective, booster clubs generally must work closely with the school, band, athletic, gym or other group that they support. However, sometimes there can be conflicts regarding how much control the school or other group has over the activities of the booster club. Booster clubs usually are separate legal entities. This means that the booster club can and should control its own activities and finances. The school or other group that is supported, however, can and should control how its facilities are used, and should advise the booster club of its needs. As a result, a school may decide whether a booster club may meet at the school or if the booster club may send fundraising information home through backpack-mail. The booster club, however, may decide whether or not to fund materials and other items that the school asks to be purchased by the booster club.
Schools may ask to review booster clubs financial records. While legally a school generally cannot require a booster club to comply, it may be a good idea to cooperate. A school financial review can provide assurance that the club's finances are being handled properly.
Are booster clubs required to file tax returns?
Yes. The IRS has a rule that any organization, regardless of income, must file the appropriate tax return. This includes ALL nonprofit groups. There is no longer a minimum threshold (i.e. $25,000) for filing a tax return. Organizations recognized as tax-exempt may generally file the appropriate form of IRS 990. If an organization does not have tax-exempt status it may be required to file a corporate tax return and pay tax on net income. See also Filing Your Annual Information Return – IRS Form 990.
What is an EIN?
An EIN is a federal employer identification number, sometimes referred to as a “tax identification number”. The EIN is a number that identifies an organization, corporation, etc. to the IRS. It is similar to how a social security number identifies an individual to the IRS. Booster clubs should have their own EIN. Booster clubs should not use the EIN of the school unless they are officially a part of (i.e. a committee of, legally operated by) the school.
You may obtain an EIN online at the IRS website – http://www.irs.gov. When joining PBUSA, you may also elect to have PBUSA assist you and your organization to obtain an EIN for an additional fee.
May a booster club use the school’s EIN?
No. A school booster club should not use the school’s EIN unless the booster club is an official “committee” or other entity that is legally part of the school.
How do members of PBUSA maintain their membership?
To maintain membership in PBUSA, organizations must annually renew their membership.
How do you and your donors verify that contributions to PBUSA member organizations are deductible?
You and your donors can confirm the tax-exempt status of PBUSA members two ways:
•a. Consult the PBUSA public member directory. IRS rules provide that "you can verify that an organization is a subordinate [member] under a group exemption ruling by consulting the official subordinate listing [of the parent organization] … or by contacting the central organization [PBUSA] directly." (See IRS Publication 4573, page 4, How do I verify that an organization is included as a subordinate in a group exemption ruling?); or
•b. Search the IRS' master file of tax-exempt organizations. Select the state in which the booster organization is located, download the Excel table that includes "P" (for Parent Booster) and then scroll down column "B" to "Parent Booster". Next, scroll across to the right to the last column "AE" to find the names of Parent Booster members located in the selected state.
The IRS includes only the parent organization, Parent Booster USA, in Publication 78. The members of PBUSA are found in the IRS EO Master File.
Guidestar also provides a list of tax-exempt organizations. However, because Guidestar pulls the organization name for its list from the IRS master file column "B," all PBUSA's members are found under the same name, Parent Booster USA. We are working with Guidestar to revise its listing information.