Thousands of school support organizations including parent teacher organization (PTOs), band booster, sports booster and other groups are likely not in compliance with federal and state tax regulations. According to Parent Booster USA, a national umbrella organization for PTOs and other school support groups, of the estimated 100,000+ booster clubs in the country, less than 10% appear to be registered with the IRS as tax-exempt organizations.
“All school booster clubs that raise $5000 or more a year are required to file a tax return with the IRS,” stated Sandra Englund, founder of Parent Booster USA. “It used to be that if a nonprofit raised less than $25,000/year it did not need to file an annual tax or information return. That’s not so anymore. If school booster clubs are not recognized as tax-exempt, they may be required to file and pay corporate income tax on the funds they raise.“
According to the U.S. Department of Education’s National Center for Education Statistics, there were 98,793 public K-12 schools in the United States in 2007. There are an additional 35,000+ private K-12 schools. Most of these schools have at least one PTO or other booster club raising funds for the school. Many schools have a half-dozen or more booster clubs including PTOs, band, choir, football, baseball, cheerleading, and other academic, sports and arts-related groups. Yet, a search of IRS records found less than 9000 school “booster” organizations listed as tax-exempt charities.
“It appears to us that a large percentage of school support organizations are unaware of IRS rules, and are therefore out-of-compliance,” stated Englund.
Annual tax, or “information” returns as the forms are called for groups exempt from paying federal income tax, are due by the 15thday of the 5th month following the close of a nonprofit organization’s fiscal year. For groups that follow a calendar year ending December 31, that means the IRS Form 990 information return is due May 15th each year. The information returns for booster clubs that follow a school year ending June 30th should file the IRS Form 990 by the following November 15th.
Lack of compliance may be due, in part, to how complicated obtaining tax-exempt status can be. To be recognized as tax-exempt charities by the IRS nonprofits must file Form 1023. Many groups find it necessary, and cost prohibitive, to obtain legal or other professional assistance to complete the required paperwork. The alternative is join a national umbrella group, such as the National PTO or Parent Booster USA, an obtain tax-exemption under a group letter ruling.
“We don’t want to see parents struggling with IRS forms, or school booster clubs paying tax unnecessarily on volunteer-earned money,” stated Englund. “Parent Booster USA was formed to provide support to booster clubs, and most importantly provide an easy, cost-effective way for booster clubs to obtain immediate recognition of tax-exempt status.”