Today’s topic is one that doesn’t exactly please my clients. However, I remind them that I am the “Princess of Doom.” It is my job to think of all the bad things that can happen and then avert any impending crisis! Today’s topic is the “booster club.”

Keep in mind that booster clubs include not only high school boosters but also youth athletic organizations, fine arts groups and other charitable organizations offering programs for a fee – not just those that call themselves "boosters." Using this IRS definition, a very large sector of our community has involvement with a booster club, as a board member, active volunteer, or parent of a child participant. In the eyes of the IRS, this has been an area of substantial abuse; so much in fact that IRS Tax-Exempt Director Lois Lerner placed booster clubs on her annual Work Plan as an area requiring review. Clearly the object of Lerner’s attention here is the propensity for booster clubs to commingle program service fees and charitable contributions, which is a big no-no.

Many organizations seek creative ways to fund-raise, to defray the cost of programs. One of the most common methods of fundraising involves students raising money to pay for trips, camps, uniforms, etc. Whether the students are selling candy, sponsorship ads in a program book, or simply seeking cash donations, the problem arises when the charity implements the concept of Participant Designated Accounts. Here’s how it works: The organization initiates a program where the student or program participant earns direct credit toward his or her program fees, camp, or trip cost based on that individual’s level of volunteer work or the amount of funds raised on behalf of the organization. This practice is extremely prevalent but creates tax consequences for both the organization and the participant. In fact, it can result in the loss of tax-exempt status.