BOOSTER CLUB START-UP, OPERATIONS, AND
RECOMMENDED FINANCIAL PRACTICES GUIDE*
STEP #1: ORGANIZE PROPERLY
It’s as easy as A, B, C
PBUSA strongly recommends that booster clubs incorporate. Incorporation structures the booster club as an independent, legal entity that can make contracts for goods and services, purchase insurance and the like. If a booster club is not incorporated, the parents and volunteers who make up the booster club may be personally liable for the actions of the booster club.
1. Obtain, complete and file your state’s articles of incorporation form. Most states provide a form online at the state Secretary of State website.
2. Make sure to include the IRS required language for 501(c)(3) organizations. See Appendix A for the required IRS special language and sample articles of incorporation.
3. If desired, Parent Booster USA, for an additional fee, can assist your organization to incorporate. See About Incorporation.
B: Draft bylaws
A booster club’s bylaws provide the rules for how your organization operates, including how often meetings are held, how voting is conducted and the like. PBUSA provides sample bylaws are based on common state nonprofit laws and IRS guidelines for nonprofit, tax-exempt organizations. These sample bylaws may be used to draft bylaws, or review your existing bylaws to see how they compare. Note, however, that state laws for nonprofit organizations vary somewhat. You may want to have an attorney licensed in your state also review your bylaws. Appendix B includes PBUSA’s sample bylaws.
C: Follow IRS rules: obtain an EIN and 501(c) tax-exempt status
1. Obtain an EIN: IRS rules, and banks, require that organizations have their own tax identification number, called an employer identification number or EIN. An EIN is similar to how a social security number identifies an individual to the IRS. School booster clubs should obtain their own EIN. Booster clubs should not use the school’s EIN. EINs may be obtained online at www.irs.gov. Alternatively, for a nominal fee, PBUSA will assist booster clubs to obtain an EIN.
2. Obtain recognition of tax-exemption: The IRS requires any individual or organization, regardless of income, to file the appropriate tax return. Any booster club should obtain 501(c)(3) tax-status to enable the organization to file the appropriate IRS Form 990 tax return and be exempt from paying federal income tax on income received. Without tax-exemption, organizations may be required to file a corporate tax return and pay tax on income earned. Tax-exemption also allows booster clubs to receive tax-deductible donations, and apply for grants.
Organizations may apply directly to the IRS on Form 1023 to obtain tax-exempt status. However, many organizations find filing Form 1023 complex, time-consuming and expensive. Alternately, booster clubs may obtain immediate tax-exemption without applying to the IRS by joining PBUSA. The IRS, under a group letter ruling, has authorized PBUSA to provide oversight of, and provide immediate 501(c)(3) tax-exemption to, qualified school booster clubs.
STEP #2: OPERATE PROPERLY
Take care of the money…
A: Adopt financial policies
Taking care of the booster clubs money is serious business. Appropriate financial policies protect the organization, donors, the treasurer and others handling funds. Appendix C provides sample financial policies. Appendix D provides guidelines to conduct an annual internal financial review.
B. Follow IRS fundraising rules
The IRS has specific rules for conducting fundraising. Booster clubs should ensure, at a minimum that:
1. All funds raised are used for the tax-exempt purpose of the organization, generally to support the school, students and community for which the club is organized.
2. Donors should be advised of the deductibility of any contributions made. If a donor receives anything of value in return for their contribution, the value of the item received must be stated and deducted from the amount the donor may deduct as a charitable contribution. Example A: If tickets to a dinner dance cost $50 and the value of the meal and dance is $25, the tickets should state that $25 of the ticket price is deductible as a charitable contribution. Example B: If a parent purchases something at an auction, generally none of the price paid is deductible as a charitable contribution unless it can be shown that the amount paid was more than the fair market value of the item purchased. For example, if parents bid on a week a vacation house owned by another parent, purchasing the week stay for $1000, none of the amount paid is a charitable contribution unless the fair market value can be shown to be less than $1000, such as by showing written documentation that the parents normally only charge $750/week for the vacation house.
3. Do not use individual fundraising accounts (IFAs) without a legal review. The IRS has strict rules on any activity that benefits the individual members of a group. The IRS generally finds IFAs to violate its rules. IFAs are activities in which parents/students engage in cooperative fundraising activities, providing “credit” to the individual “accounts” of those who participate in the fundraising activity(ies). Only in very limited circumstances are IFAs considered legal fundraising activities of booster clubs. Parent Booster USA can provide assistance in obtaining a legal review of an organization’s IFA policy. See also Individual Fundraising Accounts.
Detailed appendices, A-E, are reserved for PBUSA members only. JOIN PBUSA Now to receive all member benefits and services.