After several hoops to jump through and plenty of red tape, your booster club has been approved as a 501c3, a type of tax-exempt, or charitable organization. The work is not over once you’ve established your club’s tax-exempt status in compliance with the IRS (Internal Revenue Service). It is important to understand the applicable rules and regulations to maintain booster club 501c3 Status and keep your booster club.
There are certain requirements that must be met in order for you to maintain booster club 501c3 status as a non-profit or charity. Section 501(c) of the US Internal Revenue Code receives applications for a combined 29 separate types of organization. 501c3 is the portion that allows for federal tax exemption of nonprofit organizations, specifically those that are considered public charities, private foundations or private operating foundations. The IRS operates and regulates the administration of 501c3 status for applicant entities.
Booster Clubs as Non-profit Organizations
The central provision, which makes this section unique, is the tax-deductibility of donations. For your booster club, donations are integral to the development and promotion of the club itself (as well as that activity or group you are supporting!). Thus, it is essential you maintain booster club 501c3 status. Many states even allow for additional exemptions such as sales tax on purchases or property tax.
There are specific requirements for approval as a 501c3 organization, and these conditions must always be maintained. Once you are approved, there is no expiration date for your organization. However, there are still steps you must take to maintain status. Here are a couple of the basic requirements:
- Your non-profit organization must exist exclusively for charitable purchases such as: religious, charitable, scientific, testing for public safety, education, literary, fostering of national/international amateur sports, or prevention of cruelty to children or animals.
- There are three allowed types of organization: public charity, private foundation, or private operating foundation
How To Maintain Booster Club 501c3 Status As a Charity
Once achieved, keeping this status comes down to two related actions: maintenance of certain financial/legal records, and filing specific tax documents.
Keeping accurate and up-to-date records goes hand in hand with filing, because you need one to do the other. Even though your booster club is non-profit, it operates very much in the fashion of a for-profit organization, and the delineation must be crystal clear and provable.
Like any other business, you will need to keep records of:
- Income, expenses, assets, and liabilities
- Employee-related records such as payroll, payment of withholding taxes, workers compensation, unemployment taxes
- If your booster club hires independent contractors, you need to keep records of the Form 1099-MISC you are also legally obligated to provide them
- You are required to make available to the public your organization’s Form 1023 tax exemption form, as well as all of the three previous years filed IRS forms
- Additional requirements are found on the IRS website
You must also file the proper tax documents yearly in order for your organization to maintain booster club 501(c)3 status. The key document will be Income Tax Form 990. There are several versions of this form that pertain to individual types of nonprofits, i.e. churches and their affiliated organizations may not need to file.
Aside from federal requirements, there are certain steps you should take, even just as precautionary measures to maintain booster club 501c3 Status. Some of these are more suggestions rather than set in stone necessities:
- Your booster club should appoint a corporate board to facilitate decision making and actions taken on behalf of the organization.
- Keep your booster club’s purpose and focus in line with federal requirements for exempt status. Don’t stray from the reasons you achieved booster club 501c3 status in the first place.
- At least every 6 months or year, check in with IRS resources to ensure that no regulations have been changed or added. You don’t want to miss an amendment and lose your booster club’s status as a result.
Ways You Can LOSE Your Booster Club Charity Designation
Entities with 501c3 status are very highly regulated, as tax deductions account for a considerable value to both the IRS as well as potential beneficiaries of the entities themselves. There is a considerable amount of legal jargon pertaining to these restrictions, and care should be taken to verify your state’s requirements as well. The following is a short list of the most common reasons for revocation of 501c3 status:
- No part of the activities or the net earnings can unfairly benefitany director, officer, or committee member.
- No activity may benefit a private interest or individual.
- Any and all assets must be permanently dedicated to charitable purposes.
- Your organization may not engage in substantial political lobbying, propaganda, or related legislative activity. Lobbying may only account for a maximum of 10-20% of your organizations activity as well as resources.
- Failure to keep proper records and filing proper documents, i.e. three consecutive years without filing a Form 990 results in an automatic revocation and you will need to re-apply for tax-exempt status
- This hopefully goes without saying, but illicit or illegal activity of any kind typically will result in the immediate loss of 501c3 status.
Your booster club’s growth and progress depends on you to ensure its success. You’ve already taken the steps to attain status as a tax-exempt organization. It is crucial that you maintain booster club 501c3 status in order to operate with associated exemptions and benefits.
You will need to remain diligent with your record-keeping and filing necessary documents on time. You also need to make the effort to stay current on your knowledge of the IRS’s changes and amendments to their requirements. When it comes to staying in contact with the IRS and/or lawyers to help ensure you are properly maintaining tax-exemption.
Losing booster club 501c3 status is easy but regaining this status is not only difficult but easily avoided with the proper attention. Simply follow the IRS guidelines and you will be able to maintain booster clubs 501c3 status without issue. As with any aspect of business, staying within the proper channels and within the bounds of the law goes far. Good luck in your endeavors and make sure you maintain your booster club 501c3 status!