Most school booster clubs are not compliant with IRS regulations, potentially affecting parents and other donors who deduct contributions on their tax returns.
There are an estimated 100,000+ school, sports, band, and other booster clubs currently in existence in the United States …. Surprisingly, however, estimates indicate that less than 10% of these clubs are compliant with Internal Revenue Service Code regulations. Along with failure to register with the IRS, violation of the “inurement” prohibition under IRS Code Section 501(c)(3) is one of the most prevalent issues presently challenging local booster clubs.
This problem came to light at a local high school, where concerned parents hired a private investigator to look into their athletic booster club.
Run by parents and athletic officials in the Mount Pleasant school district, the booster club has been soliciting tax-deductible contributions for years after it was stripped of its federal tax-exempt status. In fact, the club has not filed an annual financial report with the IRS since 2009.
Contributors may face trouble with the IRS.
“I thought I was giving money to a tax-deductible charity,” said parent Mike Nicosia. “I was claiming it on my taxes. Everybody who did that, I would assume, now has to worry about an audit or a liability as far as interest and penalties.”
Even if the clubs don’t explicitly promote themselves as 501(c)3 nonprofits, many donors make that assumption.