Can Our Booster Club Be a Nonprofit and Not Be a 501(c)(3)? 

Congratulations! You find yourself in charge of a booster club. What to do now? And is what you’re trying to do even legally organized under the rules of your state? Whether you are just starting a booster club or have been managing one for some time, you should know the difference between non-profit status and 501(c)(3) status. Both have different qualifications, requirements, and benefits that booster club members should be aware of. Both have pros and cons that are important to weigh as you proceed with managing your club.

What Is the Difference Between a Nonprofit and a 501(c)(3)?

Some people use non-profit and 501(c)(3) interchangeably, but they are not the same. 

Nonprofits are usually corporations that exist for a nonprofit purpose. Some common examples are museums, public hospitals, environmental organizations, disaster relief organizations, and public schools. On the other hand, a 501(c)(3) is a specific kind of nonprofit organization that has tax-exempt status from the IRS. This status must be applied for and approved. The IRS generally only grants 501(c)(3) status to nonprofits that run charitable programs.

There are special requirements to gain 501(c)(3) status. There are some things that you may not do under the rules of 501(c)(3). For example, an organization may not:

• Distribute earnings to any private individual
• Attempt to influence legislation
• Participate in any campaign activity
• Be operated for the benefit of private interests

It is possible that your club is already registered as a nonprofit, but it has not yet taken the steps to become a tax-exempt 501(c)(3) organization at the federal level. However, this means that any revenue made by the club would be considered “profits,” which can be taxable. 

Depending on how much revenue you are bringing in, failing to file for 501(c)(3) status can be a significant oversight in managing your booster club. As many booster clubs bring in tens of thousands and even hundreds of thousands of dollars each year, a failure to file can have a huge financial impact.

Advantages of Becoming a 501(c)(3)

There is no requirement for booster clubs to file for 501(c)(3) status. Taking the steps to do so is completely up to your club after you have weighed the pros and cons. However, doing so can help the club grow and protect the hard-earned dollars raised through fundraising, donations, and sponsorships. Often, donors are more likely to donate to your club when they hear you are a “501(c)(3) organization.” They feel more comfortable knowing you have taken the financial steps to comply with governmental oversight into the accounting of revenues.

There are a number of benefits of gaining 501(c)(3) status, including:

• Tax-deductible contributions
• Exemption from federal income tax
• Tax-exempt financing
• Exemption from federal unemployment tax
• Possible exemption from state income tax (depends on your state’s rules)
• Reduced postal rates

Your club may be able to save a substantial amount of money in tax liability by gaining 501(c)(3) status. This additional revenue can help the club grow and invest in upgrades like gear, equipment, booster club accounting software, and more.

Not Sure What to Do? Contact an Expert

If your booster club hasn’t filed for 501(c)(3) status, it’s probably because no one has taken the time to research and file the paperwork. Dealing with the IRS and tax questions can be overwhelming for anyone, especially volunteers who are already stretched thin. 

To help you with the process, you can find a nonprofit accounting firm or consult an expert who can help you understand the benefits and implications of filing and can assist you with the paperwork. 

While your club may be hesitant to take on another expense, utilizing a filing service like Parentbooster USA Inc. is worth every penny. Parentbooster USA is a one-of-a-kind service that handles tax paperwork for booster clubs. It enables booster clubs to apply for 501(c)(3) status under the umbrella of Parentbooster’s status. In other words, it makes applying much easier, and much faster, and much more likely to be approved in time for the season to start! It’s a great idea to use such a program for helping with school booster club tax-exempt status, filing, and taking the burden off your plate.

If you’ve been putting off catching up on your booster club’s tax status, now is the time. It is well worth the effort to ensure that your organization is getting all the benefits it is entitled to.