IRS Memo Highlights Booster Club Misclassification of Tax-Exempt Status

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A recent memorandum from the director of exempt organizations highlights the proliferation of booster clubs and complaints from parents that they are being forced to raise funds to support groups that are classified as charities but should more properly call themselves cooperatives, Harvey Mechanic, a Los Angeles sole practitioner, tells BNA. Traditionally, IRS has recognized booster clubs as tax-exempt under either Section 501(c)(3) or 501(j) on the grounds that they promote amateur athletics and instruct youth in sports. Many tax code Section 501(c)(3) booster organizations have been ignoring the law and acting as cooperatives, he says. A cooperative is not qualified as a 501(c)(3) organization, and a 501(c)(3) booster organization is to be a charitable, not a cooperative, organization, he says.