I mentioned in a previous post that three booster clubs in KY were being fined by the IRS for their fund raising practices. The issue was that the booster club was giving parents credit for their fund raising efforts.
The booster clubs have appealed to their congressmen for help. But it appears the IRS is digging in its heels on this issue. From the Lexington Herald-Leader:
Lois G. Lerner, Director of Exempt Organizations for the IRS, explained in a letter to the booster clubs that any booster club that raises money to benefit an individual student rather than a group is in violation of federal law and stands to lose its tax-exempt status. Lerner said the practice was against federal law.
“The requirement that each parent/member of the club must participate in the fund-raising activities in direct proportion to the benefits they expect to receive toward their children’s expenses directly benefits specific individuals and the parents instead of the class of children as a whole,” she wrote.
Do a Google search on “KY Booster Club IRS” to read more on the story (copyright prohibits a direct link)
So my advice is as before: If your organization is sharing, dividing or distributing fund raising proceeds to individuals or families, stop the practice and leave all fund raising proceeds in the general fund to benefit the group at large.
I’ll keep watching this issue. If the congressmen have any success with the IRS, I’ll let you know via this blog and my monthly newsletter (subscribe here)
Carol Topp, CPA