Nonprofit Insights & Giving Tips

Booster clubs do remarkable work. Parents give up weekends to run concession stands, sell raffle tickets, wash cars, and organise auctions so that a team can afford new uniforms, a competition trip, or equipment the school budget will never cover. Somewhere along the way, a reasonable-sounding idea takes hold. If a family works twenty shifts and another works none, why should they pay the same for the trip? So the club starts crediting each family for the money they raise, and those credits reduce what that family owes.

It feels fair to everyone involved. Unfortunately, booster club individual fundraising accounts have long been one of the areas where the IRS has raised concerns about tax-exempt status, and many clubs operate this way without realising the risk. Understanding why the problem exists, and what alternatives work, lets a booster club reward hard work without putting its exemption or its parents in an awkward position.

What Is a Booster Club and How Is It Usually Structured?

A booster club is a volunteer organisation, usually made up of parents, formed to support a school team, band, dance squad, or similar programme. Most seek recognition as tax-exempt organisations under section 501(c)(3) of the Internal Revenue Code, which allows them to receive tax-deductible donations and often exempts them from certain taxes. To qualify, an organisation must be organised and operated exclusively for exempt purposes, such as charitable or educational activities, and its earnings must not benefit private individuals. That second point, known as the private benefit and private inurement rules, is the heart of the issue discussed in this article.

Booster clubs typically raise money through concessions, events, sponsorships, product sales, and direct donations, then spend it on equipment, travel, coaching support, facilities, and competition fees. The trouble starts not with how money comes in, but with how clubs decide which students benefit from it.

What Are Individual Fundraising Accounts?

An individual fundraising account, sometimes called an IFA, a player account, or a family credit account, tracks how much money a particular student or family raised and applies it against that student’s costs. If a family sells 400 dollars of discount cards, the club credits 400 dollars toward their child’s competition fees.

Some clubs go further, refunding unused credits, carrying balances forward for years, or transferring them to a sibling. From the inside, it looks like an accounting convenience and a fair way to reward effort. From a tax perspective, it can look like the charity is operating a private benefit scheme, because the money raised under the organisation’s tax-exempt name is being directed to specific individuals rather than the group as a whole.

The IRS has addressed this pattern in guidance and in decisions involving booster clubs, and some organisations have lost or been denied exemption over it. The problem is not the fundraising itself. It is the direct link between one family’s effort and that family’s private benefit.

Can a Booster Club Require Families to Fundraise?

Requiring participation is a related trap. Many clubs tell families they must either raise a set amount or write a cheque for the difference. That arrangement effectively turns fundraising into a personal obligation, and the money raised looks like a substitute for a required fee rather than a charitable gift. It also creates awkward pressure, since families who cannot sell easily end up paying more, and students may be excluded from activities because of their parents’ fundraising results.

A safer approach is to keep fundraising genuinely voluntary and separate from participation. Families can be invited to help, encouraged, and thanked, but nobody should be told their child will miss a trip because the family sold fewer raffle tickets. If the programme has real costs that must be covered, those costs should be handled transparently as fees or as need-based support, not disguised as fundraising quotas. Keeping the two things apart also protects volunteers from feeling that their goodwill has become an obligation.

What Should a Booster Club Do Instead?

The good news is that clubs can still raise money enthusiastically and support students generously. They simply need to pool funds and distribute benefits based on need or on the group as a whole rather than on individual fundraising performance. Common compliant approaches include:

• Pooled general funds that reduce costs equally for every participating student.
• Need-based assistance awarded by a committee using written criteria and an application.
• Group purchases of uniforms, equipment, travel, or coaching for everyone.
• Blanket fee reductions, such as lowering the trip cost for all students when fundraising goes well.
• Recognition instead of credit, thanking top volunteers publicly rather than financially.
• Scholarships granted through a documented, objective process.

Clubs sometimes worry that removing individual credits will kill motivation. In practice, many find the opposite. When fundraising benefits the whole team, families often turn out in larger numbers because the effort feels shared rather than competitive, and the awkward conversations about who did what tend to disappear.