Booster News: Booster Club Loses Nonprofit Status

iStock_000007722312XSmallBooster clubs can lose non-profit status with the IRS. A recent Forbes article brought this to our attention again, highlighting an IRS ruling from late August.

“Capital Gymnastics operated in a manner that allowed substantial private inurement,” said the ruling. “[Capital Gymnastics] promoted private, non-public interests.”

How did Capital Gymnastics ruin it’s 501(c)(3) status? Using a point system. Parents who didn’t want to fundraise paid, while other parents did collective fundraising to earn themselves points. The court decided that the point system amounted to them fundraising for themselves.

“Therefore, the organization did not operate exclusively for an exempt purpose. We conclude that Capital Gymnastics did not satisfy the requirements of section 501(c)(3) and consequently did not qualify for exemption from tax under section 501(a).”

As I cautioned in one of my first posts, point systems should be carefully reviewed to make sure you don’t ruin your club’s relationship with the IRS. For more, check out my article on 501(c)(3) status for non-profits:

3 Ways to Get 501(c)(3) Status and Become a Non-Profit Booster Club

Comments

  1. Good article.

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