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Athletic Booster Clubs Face Intense Scrutiny: 5 Tips to Keep Out of the Penalty Box

by Sandra Pfau Englund on Mar 22, 2018 04:08 pm

Follow the money.  It’s the rule investigators use to sniff out corruption.  It’s also why athletic booster clubs face intense scrutiny by the Internal Revenue Service (IRS), the Department of Education (DOE), and amateur athletic regulating bodies. It costs $35,000-50,000 a year to train Olympic-level figure skaters. Parents shell-out $2000/year or more to have their junior-level gymnasts compete.  The cost to equip a high school football player? From $800-1000/per player.  (The helmet and shoulder pads alone often run $500/player.)  It’s all that money, and how it’s raised, that can get athletic boosters into the penalty box…unless you know the rules of this money game.

Booster clubs and the IRS

Athletic booster clubs supporting national and international competition were first eligible for IRS 501(c)(3) tax-exempt status, making their income free from federal income tax, in 1976. Sports boosters supporting local and regional competitions became eligible for tax-exempt status in 1982. Just ten (10) years later, however, the IRS published Athletic Booster Clubs: Are They Exempt?, suggesting that athletic boosters either didn’t understand the rules of tax-exempt status, or weren’t playing fair. This article lays out the ground rules for operating an athletic booster club. It defines what’s foul play in the booster club game, including boosters that require their members to volunteer, or clubs that limit their support to the athletes who participate in fundraising.  

Some booster parents argue that it’s only fair to restrict the money raised to the people that raise it. Why should freeloaders share in the fundraising rewards? This argument sounds reasonable. But upon further review of the IRS rules, you’ll find that booster clubs are given tax-exempt status because the money raised supports a “public purpose”, like amateur sports competition. To support amateur sports competition means that you must support all athletes on the competition team, regardless if they are members of the booster club, or if they help fundraise. It may help to think about another tax-exempt organization, like National Public Radio (NPR). Everyone can listen, but only a small percentage make donations to support NPR.

It’s been 25 years since the IRS published the rule book on athletic booster clubs. The rules must be widely known and followed by now? Nope. In a 2013 U.S. Tax Court case, a gymnastics booster club was stripped of its 501(c)(3) status because it used the tax-free funds raised to support only the gymnasts and their parents who participated in fundraising. A quick google search reveals many other clubs that publicly advertise that they aren’t following the rules. For example, a prominent Colorado Springs gymnastics booster club states on its website that “active members” must complete 25 hours of volunteer service in the Bingo fundraiser or pay $20/hour for hours not worked. If you opt-out of fundraising, you “agree” to waive financial benefits resulting from the booster club’s Bingo operation, which according to the club’s 2016 IRS Form 990 tax return, grossed the club over $1,000,000.

Booster clubs and Title IX

If the IRS rules aren’t taxing enough, athletic booster clubs and the schools they support must beware the impact of booster funds on their schools’ compliance with Title IX. Title IX is a federal law that prohibits discrimination based on gender in federally funded educational programs or activities. This means that schools must make sure that male and female athletes have:

  • Equal quality and quantity of equipment and supplies
  • Fairness in scheduling games and practices
  • Equal financial support for travel and expenses
  • Fairness in assigning and paying quality coaches
  • Equal facilities (locker rooms, fields, and arenas)

Booster clubs are not directly subject to Title IX, but booster club donations can tip a school’s balance of providing equal opportunities for boys and girls. For example, if the boy’s baseball boosters provide donations to the school resulting in the boy’s equipment and supplies, locker rooms and other facilities to be superior to what is available for the girl’s softball team, a Title IX complaint may be made to the DOE Office of Civil Rights to resolve the inequality. As a result, boosters and the schools they support must work together to decide the amount, and type, of donations a school accepts.

Amateur athletic rules

Amateur athletic regulating bodies, such as the University Interscholastic League (UIL) in Texas, have rules to ensure student athletes’ priority remains education. These rules require, for example, that students not be paid or otherwise compensated for participating on a sports team. Athletic boosters, therefore, should not provide gifts or rewards to student athletes without the school’s consent to make sure they don’t violate amateur athletic rules.

5 Tips to Keep Out of the Penalty Box

This playbook is so jam-packed, how do you keep track of all the rules? A good place to start is with these 5 tips developed by Parent Booster USA to keep your booster club out of the penalty box:

  • Talk.  Talk to school representatives. Ask what’s on the school’s wish list. This helps the school meet its obligation to be fair and equal in providing athletic activities and facilities for boys and girls.
  • Ask.  Ask the athletic director, coach or other school representative to attend your meetings. To prevent a conflict of interest arising between the booster club raising and granting the money, and the school receiving the money, school representatives should serve as non-voting, advisory members of booster clubs.  
  • Grant.  The best practice is for booster clubs to grant funds for designated purposes to the school. The school may then use its normal contracting and purchasing procedures to buy the designated equipment or contract for the services funded.
  • Use. Use booster funds to support the entire competition team. Focus on paying for transportation expenses or making a grant for equipment that the entire team uses. Never “credit” booster funds to athletes based on the amount of funds raised or volunteer hours worked. 
  • File.  Make sure your booster club is structured appropriately, including applying for IRS 501(c)(3) tax-exempt status, and registering to fundraise in states that require it. Most states also require you to obtain a license before holding a raffle or other game of chance. Don’t forget to file your IRS annual 990-series tax return to keep your tax-exempt status, and annual state registration renewals to keep your state corporate and charity (fundraising) status in good standing.

We teach our kids to play by the rules of the game. We also teach them that sometimes life doesn’t seem fair. To the parents who slave over fundraisers every weekend, and chaperone the field trips, it may not seem fair that the kids whose parents don’t help benefit from your hard work. The rule of this game, however, is to make sure all student athletes have an opportunity to improve their skills and compete. 

Questions? Reach out and ask. Parent Booster USA is always on your team.

FEATURED BLOG

Running an Effective Meeting

Sandra Pfau Englund

Aug 30, 2019

Booster club bylaws often reference Robert’s Rules of Order as the “rules” for managing a meeting. Have you ever read Robert’s Rules? It’s a good way to get a good night’s sleep!

O.k., so, having no rules leads to muddled, oftentimes chaotic meetings. On the other hand, using strict Robert’s Rules of Order can result in confusion or imbalance, dominated by those very few who understand Robert’s Rules. According to Sandra Englund, founder of Parent Booster USA, it’s far better to use a simplified form of parliamentary procedure. Using Sandy’s Simple Parlipro for Nonprofit Organizations, you provide a solid framework for your meeting that encourages everyone to participate and stops any one person from controlling it.

Meetings should not be all about the rules. According to David Gillig, Senior Vice President of Children's Hospital and Health Center in San Diego, a meeting should be 80% inspiration, learning and fun, and 20% business. Busy parents are more likely to attend if they feel as if they will gain something for themselves, and their kids, out of the meeting. We recommend that you start the meeting with something fun or educational — our parent engagement blog talks more about this.

Place reports at the end of the meeting; consider providing digital or written copies of reports that parents can read outside of the meeting. No one wants to sit through standard reports. One exception is financial reports. Always include the treasurer’s report. The treasurer’s report should include a written budget and a report that shows how money was raised and spent. Making bank statements available is a good way to help ensure accountability. You can read more on financial accountability here.

It’s good practice to put start times for each item on the agenda. This helps ensure that the meeting stays on track and flows effectively. It’s particularly important if you are discussing any controversial issues in which it is more likely that someone will filibuster! Having a rule that each person gets an opportunity to speak once, before anyone is given a second opportunity to speak, helps encourage more participation.

Below is a sample agenda to help you get the most out of your booster club meetings. Start your meeting by reviewing the agenda. This is where you can explain the “rules” you’ve set for the meeting, including for example, that you will work to stay on-time to help ensure that the meeting starts and ends accordingly. You can also mention here, or just before the Q&A time with the principal, that each person will be provided the opportunity to speak once before anyone speaks for a second time. The report time is kept brief to allow the bulk of time to be given to the information provided by the principal. Minutes need approved; although a little unusual, we included approving the minutes at the end to allow more time for the more important matters up front.

ABC Booster Club
Agenda
[DATE]
1. Call to order & Review of Agenda 6:00p
2. Guest speaker – Principal Melissa Everly discusses school remodel plan 6:05-6:25p
3. Q&A 6:25-6:35p
4. Financial report 6:35-6:45p
5. Other reports 6:45-6:55p
6. Approve minutes from prior meeting 6:55p
7. Next Meeting 6:59p
8. Adjourn 7:00p

Planning and structuring your meeting for success if the key to having an effective meeting.

YOU SUPPORT THEM, WE SUPPORT YOU

With PBUSA membership, we file all the IRS and state paperwork. We keep your booster club up and running year after year.

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