TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, September 15, 2013

WSJ: IRS Challenges Tax-Exempt Status of Schools' Booster Clubs

Booster CLub 2Wall Street Journal Tax Report:  Booster Clubs Attract Scrutiny, by Laura Saunders:

Is your school's booster group truly tax-exempt?

It is a good question to ask now that school is back in session and groups are fundraising. Tax-exempt status is important to potential donors because it helps legitimize a group and contributions often are tax-deductible.

A U.S. Tax Court ruling last month could snarl the tax-exempt status of thousands of booster clubs and similar groups across the country, experts say. In Capital Gymnastics Booster Club v. Commissioner, [T.C. Mem. 2013-193 (Aug. 16, 2013),] the court upheld the revocation of the tax-exempt status of a parent-run booster club in Virginia that supports student gymnastics. Although the decision applies only to this club, experts say the IRS will take it seriously when reviewing other groups." Based on this case, there are probably many booster clubs around the country whose exempt status is questionable," says Chris Hesse, a certified public accountant at CliftonLarsonAllen in Minneapolis. ...

Typically, booster clubs are tax-exempt organizations formed by parents to provide support to students in the classroom or for specific extracurricular activities such as band, soccer or gymnastics. The groups often solicit parent contributions and raise outside funds by sponsoring auctions, holding car washes or selling gift wrap or candy. The money is then used to defray costs of extras such as buying equipment or funding trips to competitions or events.

Many of these booster clubs are organized as tax-exempt 501(c)(3) charities, a category that also includes a huge number of schools, religious groups and health-care groups. Contributions to 501(c)(3) charities typically are tax-deductible. ... But there is a hitch: To be tax-exempt, booster clubs and similar groups have to meet the same requirements as other charities. That means a group must serve the public interest, and its earnings can't benefit only a few people. That second requirement—known in tax law as "private inurement"—is where the Capital Gymnastics Booster Club tripped up.

Tax | Permalink


Going after booster clubs could force states with Southeastern Conference football teams to secede.

Posted by: Woody | Sep 16, 2013 7:56:46 PM