A Brighter Way
A Brighter Way
The Internal Revenue Service has issued a warning to booster clubs that conduct fundraisers that they may be subject to IRS scrutiny, including jeopardizing the groups’ 501(c(3) status. An IRS directive addresses the possible tax consequences for booster clubs that reduce the amount a participant is required to pay based on the amount of fundraising the individual has done.
The concern of the IRS is that fundraising activities for tax exempt organizations are intended to benefit a broad class of people. As a result, the agency would most scrutinize fundraising activities that benefit one or a handful of people. The possible consequences of an unfavorable IRS ruling could include penalties and in the most serious cases, loss of the group’s tax-exempt status.
There are currently no court cases that uphold the IRS directive. Given the number of small organizations with limited dollars that may be impacted, it is expected that the agency will concentrate its audits on larger organizations. Booster clubs and other nonprofit organizations that conduct fundraising activities will need to weigh the risks involved with continuing or stopping fundraising efforts.
For additional information, view the IRS directive here http://www.irs.gov/pub/irs-tege/booster_club_field_directive_6-27.pdf. If you have additional questions about how the directive could impact your organization, please talk to your accounting professional.
Click here for additional information on our Ohio Tax Services.
This article was originally published in Illuminations: Facts & Figures from people with a brighter way, a Rea & Associates enewsletter, 8/31/2011.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.
