In my previous post, I walked you through how to organize and file the needed paperwork to form a tax-exempt school booster club. This post is going to talk about what you do AFTER your organization has been officially formed, as well as touch on what options you have for getting your booster club reinstated as a tax-exempt organization if your club is no longer in good standing. As always, I’ll remind you that I am not a lawyer, and I don’t know your specific situation, so none of the below should be interpreted as legal or financial advice. When possible, I provide links to the information I’m sharing, and I encourage you to do your own research, and if necessary, consult with your lawyer or financial advisor for situations unique to you. And while I’ve linked to the IRS and OK information return forms, keep in mind that these are revised fairly regularly, and there may be a new form available. A simple Google search should return the needed form.

Prepare to Pass the Torch

I know, I know. You’re probably thinking “I just finished getting my organization set up, the last thing I need to be doing is planning for my exit.” While it probably feels as if now is the time to recruit the last of your board, entice volunteers to join your mission, and start raising those much needed funds for your school, I assure you if you spend just a LITTLE more time prepping for the future, it can save you loads of grief down the road. I highly recommend that you create a formal document for each board and volunteer-leadership position that describes the position, qualifications for the position (if any), and a list of required duties that the position is responsible for, along with due dates for these duties, and detailed instructions for these duties. This allows you to review the organization “to-dos” as a whole to ensure everything that needs to be done is assigned. In my experience, it also makes recruitment a lot easier when parents/volunteers are provided with a clear understanding of what a specific board position does. For example, I’ve seen parents physically recoil when asked to serve on the board as Treasurer, because they feel that formal financial training is required to handle “the money stuff.” But volunteers are normally a lot more willing when you can show them that you have an “onboarding” document that will walk them through the process every step of the way.

A fact of school booster clubs is that their board changes regularly. As kids grow up and graduate/change activities, the parents typically move with them. So it’s really important that you have some procedures in place to make sure no needed duties or “institutional knowledge” falls through the cracks.

This post will focus mostly on the financial and legal requirements, which are typically assigned to either the Treasurer, or the Secretary on your board. We’ll start with the paperwork. In order to keep tax-exempt status, booster clubs must do the following (detailed instructions provided below):

• File a 990 return with the IRS annually
• File a 512-E return with the State of Oklahoma
• Renew your Business Certificate with the State of Oklahoma

In addition, I highly recommend the following actions at least annually.

• The Treasurer should keep track of fund inflows and outlays of the club as they happen. Best practice suggests that you have a DIFFERENT board member reconciling the books to the bank statement monthly to make sure all business activity is appropriately recorded. If that isn’t possible, it’s totally acceptable for the treasurer to perform the monthly reconciliations as well. However, once a year, it is a good idea to have two volunteers/other board members review these reconciliations for accuracy and completeness. Not only will this provide a “second set of eyes” to catch any mistakes, it also prevents that thing that no one likes to talk about, but happens far more often than we would think…FRAUD. Here are only a few cases of money gone missing from school activity funds – cases in North Carolina, Texas, Tennessee, Virginia, and many others have been reported over the last few years. While we never like to think that it would happen with OUR club or OUR school, unfortunately, it all too often can. It’s best to have procedures in place to try and prevent or catch this activity sooner rather than later.
• It’s also a good idea to read through your club’s bylaws at least once a year, and update them with any changes in policies, procedures, or activities. Bylaw changes are typically made by your board member(s) or sub committee, and then presented to your membership to vote on the changes. Examples of changes that may need to be made would be updating the bylaws to allow the board meetings to happen via teleconference rather than in person, shuffling the duties of the board if one position feels overwhelmed with tasks, adding a new board position, updating term limits for board members, changing membership fees, or other administrative tasks.

Lost Your Tax-Exempt Status? Don’t Worry, it happens.

Because of the frequent rotation of board members, it’s not a rare occasion that tasks HAVE slipped through the cracks. If a booster club fails to file their 990’s for three years in a row with the IRS, the organization’s EIN is automatically revoked. Luckily, it’s not terribly difficult to get it back. If you are within 15 months of your exempt status being revoked, you can apply for reinstatement by giving the IRS a reasonable explanation about why your club was unable to meet the needed requirements. If you are past 15 months or revocation, you will need to provide an explanation for all three years of missing the requirements. The Oklahoma Not for Profit Center Provides a great document detailing this information. To apply for reinstatement, you would fill out the same 1023 Form that you did when you first applied for Tax Exempt Status, only you would mark the appropriate Reinstatement option on this screen.

For the State of Oklahoma, you will need to file an Annual Certificate Request for each year you were NOT in good standing. Here’s a snippet from the Secretary of State’s FAQ website detailing the process.

How do I get my entity reinstated or back in good standing?

The forms to reinstate may be downloaded from the Secretary of State’s website at https://www.sos.ok.gov/business/forms.aspx. Scroll down to the forms listed under the respective entity type and the forms are listed there. A Reinstatement form has no fee but must be included anytime an entity is inactive, and an Annual Certificate form is required for each year past due.

Notes, Clarifications, and Some More Helpful Links

• The IRS has a great document called “Lifecycle of a Public Charity” that shows everything required to set up and maintain a Public Charity (which is what your booster club is, if you’ve followed the Setup Instructions). Please consider this document the “BIBLE” if this post contains anything information that conflicts with what is here.
• The State of Oklahoma also has a resource page for not-for-profits. You can find that here. https://www.sos.ok.gov/charity/Default.aspx
• ParentBooster.org is a treasure-trove of Booster Club information, and they also offer a paid “keep you legal” service for an annual fee. This is one of my favorite reference documents from their site.
• Oklahoma Center for NonProfits is another good information site – they provide info on NFPs in general (not just Booster Clubs) and have good resource documents, training, a place where you can advertise your events on their calendar, and they also offer paid consulting/bookkeeping services.
• I did want to make a note of this, because I’ve had clients confused on the difference between being a Tax-Exempt organization in the eyes of the IRS, and being SALES TAX exempt in the State of Oklahoma. These are not the same thing. In fact, in many cases, even though you are a not-for-profit organization, you are still required to pay sales tax. Meaning if you sell physical merchandise (like t-shirts, concessions, desserts, etc), you are technically required to remit sales tax equal to 8.513% (depends on county) of what you sell. You can, however, submit an application for Oklahoma Sales Tax Exemption by using this form.
• The term EIN and FEIN mean the same thing. The F just stands for (F)ederal (E)mployer (I)dentification (N)umber.
• While I checked with my local school, and they do not have one of these, I love this document that a school created as an information packet for their booster clubs. (Keep in mind this school is based in California, and state laws may differ)

How to file a form 990

The form 990 is due on the 15th of the 5th month following the organization’s year end. So if you are a calendar year end (Jan-Dec), the due date is May 15th. Here’s a link to a handy chart showing due dates for various fiscal year ends.

There are four* versions of the form 990 available,

• 990-PF – this one is used for private foundations – we won’t be covering it here
• 990-N – this version can be used for orgs with under $50k in revenues annually, and is the one I recommend you file if your organization qualifies. It is by far the shortest and easiest, and requires very little detailed financial information to be gathered. I’ve detailed the steps below.
• 990-EZ – You may hear this referred to as the “mid-form”, and is used for orgs with under $200k in revenues and under $500k in assets. While longer than the postcard version, you’re not required to provide as MUCH information as the 990. The IRS provides instructions for this form, but if you get confused, I recommend reaching out to your tax pro.
• 990 – otherwise known as a “long-form”, this is used for orgs with over $200k revenues/$500k assets). This one gets fairly detailed in terms of what and where you need to report items, and I recommend you considering hiring a professional tax preparer to file for you.

*If you have unrelated business income, there’s also a form 990-T. Unrelated business income is income that your club might earn, but is not related to your organization’s mission or activities. For school boosters, this is uncommon, but an example might be that your club owns a building, and rents this building out to tenants. This rental income is not related to your club’s mission of supporting your school activity, and you would need to pay income tax on this.

There are a few nuances in how to determine the form your organization must file. This link will provide you with additional information on which one your organization needs to file. The postcard is the easiest, and is online submission only, and if you qualify to use this one, I highly recommend it, because very little information is needed in order to submit. The link to the postcard page is here.

You will need to register yourself with the site if you have not already done so, and either select or enter the EIN of your organization. (If you do not have an active EIN, I recommend you review my post on how to apply for an EIN, or the instructions on how to request reinstatement below.)

Enter your tax year end date. If your organization is still active, select “No” from the first dropdown, and “Yes” for the Gross Receipts. (Remember, if you have gross receipts OVER $50k/year, you should not be using this form). Enter the legal name and EIN (You can get this from the letter you received from the IRS when you applied for the EIN)

If you use a different name than your legal name, enter it in the DBA field, then enter the organization’s address and officer information.

How to file an OK Form 512-E

Just like the IRS’s 990-T, even though you are a tax-exempt organization, the State of Oklahoma would still like to collect taxes on any “unrelated business income.” Regardless of whether you actually have unrelated business income or not, you are still required to file form 512-E. Because situations like this are uncommon for school boosters, I’m not going to detail how to fill this out…most of it will likely be 0’s for you. This form is due a little earlier than the IRS form 990 at 4.5 months from the end of the fiscal year, so Calendar year folks would have this due on April 15th each year.

How to Renew Your OK Business Certificate

You are also required to renew your business license on an annual basis. This is a fairly simple process. The fee for this renewal is currently $15 if your gross receipts are under $10,000 per year, and $65 if over that amount.

Start here.

Select “Start New”

If you still have your filing number from when you first filed, you can type that in. Otherwise, leave the field blank, and click the magnifying glass. I’m unfortunately unable to provide step by step screen prints for this part at this time, because you have to have a not-for-profit up for renewal, and I don’t have any clients at this stage yet. I will attempt to remind myself to update this section when I DO have screen prints to share.

A year or so back, I volunteered for my son’s school activity booster club, and was asked to serve as Fundraising Coordinator. One of the first tasks asked of me was to investigate the possibility of getting the organization signed up for Amazon Smile, a program designed to allow NonProfits to partner with Amazon, and earn a % for any items purchased from Amazon. During the research phase, I unfortunately discovered that the organization had been operating without an EIN or Exempt status for several years, due to their failure to file the appropriate required forms – specifically their annual Federal IRS Form 990.

So I thought it might be a good idea to write a post on exactly HOW an organization such as a school booster club should go about obtaining their exempt status. Please keep in mind that this is general information only; the below should not be considered formal legal or financial advice, and you should ALWAYS discuss your specific situation with your lawyer or accounting professional. Also please note that I’m detailing how an Oklahoma organization would register as of the date of this post; the rules for your situation or state may differ.

Here in Oklahoma, there are four steps involved in the initial formation of a school booster club.

• Write Articles of Incorporation and Bylaws
• Register your Organization with the State of Oklahoma
• Apply for an EIN with the IRS
• Apply for Exempt Status with the IRS

Looked through these steps, and have a headache forming? You are welcome to contract us to do these steps for you. Check out our Entity Creation Services. (Does not include filing fees)

After your organization is successfully formed, click here for details on the the activities that must happen each year to KEEP your organization in good standing.

Articles of Incorporation and Bylaws

For a tax exempt organization, the IRS requires certain provisions to be included in the Articles of Incorporation. You can find details of these provisions here. In general, these provisions certify that the organization was formed for a not-for-profit purpose, will operate for a not-for-profit purpose, and if the organization ends/is dissolved, the dissolution of assets will be distributed for not-for-profit purpose. All of these provisions are designed to guarantee that no one sets up a not-for-profit in order to use the “bonus” of being tax exempt to make money for personal gain. The IRS provides a sample document for Articles of Incorporation here, and you are absolutely allowed to use these instead of writing your own. Just fill in the blanks, have your board sign them, and you’re done.

The IRS does not have any specific guidelines for Bylaws, but it is best to include details in your bylaws that describe the organization, its mission, its governance structure (i.e. what positions constitute the board, are they appointed or elected, for what length of term, etc), the duties of the board, policies and procedures relating to documents, finance, events, etc. Basically, the bylaws lay out how the organization should function, BEFORE questions arise within the organization. Here’s a sample document you are welcome to use for your bylaws that contain “Best Practice” policies for booster clubs. You can add or remove items as needed, but I’ve highlighted some of the areas that probably need to be reviewed before presenting them to your board/membership for approval. And apologies for repeating this ad nauseum, but it is YOUR responsibility to verify these documents, when complete, meet applicable state and federal laws – I’m providing them as a courtesy, and do not guarantee their function. I am not a lawyer, and I am not your accountant.

Register Your Booster Club with the State of Oklahoma

In order to apply for Federal Tax Exempt status, you must first register your organization with a state regulatory body. In Oklahoma, that would be the Secretary of State. This section walks you through the screens (as of the date of this post) you are required to complete in order to file. Once your application is submitted, it will be reviewed, and if approved, you will receive a formal notice from the State certifying you’re a “legal” organization.

Start your application process here. (You may need to register as a user on the site first. Make sure you SAVE your registration details somewhere because you will use them again to pick up a copy of your certification should your application be approved).

You must first determine whether your organization name is already in use by searching the database of registered corporations. Type your proposed name into the search box and click the magnifying glass. If your name is not in use, congratulations, you will be able to click the “Next” button to move on.

This page asks you to describe your organization – specifically its purpose, the date it will “begin”, and the date the organization will “end.” The good news is – if you’ve completed your Articles of Incorporation and Bylaws, you already have this information. Simply copy your purpose below.

Choose the Start Date (usually the day you are filling out the form OR the first of the month/year)

It IS possible to set up an organization for a specific time frame. But in the case of School Booster Clubs, the goal is typically that the organization will exist for years to come, and therefore, you will probably want to choose “Perpetual.”

The next page asks you questions about how to get in touch with your organization. A registered agent is any person over 18 years of age (or another legal business entity) that is designated as the person (or business) that is the legal contact for the organization, and can receive mail, communications, etc on behalf of the organization. They need to have a physical mailing address – not a P.O. While most booster clubs designate a board member as the registered agent, sometimes your CPA or Lawyer will consent to be the registered agent. Make sure you choose someone familiar enough with your organization that they will recognize any mail addressed to the organization.

At least three people must be willing to sponsor the organization for incorporation – generally these are members of your initial organization’s board of directors, though it does not have to be a board member. It’s not typical that a business is an incorporator of a school booster club, but it is allowed if you choose. You will enter their information (one at a time) into the form. They will be required to Electronically SIGN the application in later steps. (By typing their names into a form field).

The State also needs a record of all the Board Members and their contact information. So if you have a President, Vice President, Treasurer, Secretary, and maybe a couple of “Directors at Large” or other voting members of the board, you will need to list them along with their contact information. Add a record for each board member, and then add the total count of directors you plan to elect in your first meeting.

The next section asks for any attachments to your application. I recommend you attach a copy of your Articles of Incorporation and Bylaws here so the state officials can refer to them when reviewing your application.

You’re in the final stretch! Next up, it’s time for the three individuals/businesses who sponsored this application to sign the application document. You will need to add a signature for each person, and have them type their name to sign.

You will need to provide payment details for the filing fee – the initial filing fee is $25. Congratulations, you’ve successfully applied for a not for profit business certificate with the state! Now all you need to do is wait for the State to make a decision on your application. You should get the results of their decision via the email address you registered for the site. Processing times will vary, but I typically see these processed within 5 business days.

Register for an EIN with the IRS

Once the Secretary of State has approved your application, you can now apply for a Federal Employer ID Number, or EIN. You will need this EIN to file your annual tax forms, hire and pay employees (if applicable), and pay sales tax (if applicable). In many cases, you’ll also need an EIN to open a bank account for the organization.

Start this application process here. (Again, you may need to register as a user of the site before accessing.)

You start by designating the type of organization you’re filing for. You will need to Choose “View Additional Types, Including Tax-Exempt and Governmental Organizations”

Depending upon the mission of your booster club, select the appropriate type of organization. I normally see these set up as “Community or Volunteer Group”, “PTA/PTO or School Organization”, or “Other Non-Profit/Tax-Exempt Organizations”. You can click the names of these types, and see a brief description to help you choose.

You now need to provide the IRS with a main contact. I recommend choosing either your registered agent, or a member of your board, such as the Treasurer or Secretary.

Provide details of your organization – most of this can be pulled from your Articles of Incorporation or Bylaws.

The answers to these are generally No, but read and select the appropriate response for your organization.

School Boosters typically fall under Other.

Boosters probably should select Organization.

Choose the appropriate primary activity, and provide a brief description.

And that’s all! You now choose whether you want your EIN mailed via postal mail, or provided electronically via PDF.

Register for Federal Tax Exempt Status

So you’re now a legal entity in the eyes of both Oklahoma AND the IRS. The last thing to do is apply for federal tax exempt status. I highly, HIGHLY recommend that you apply for tax-exempt status, because I feel that it provides benefits to both your organization, and your supporters.

Benefits to Your Organization

• You will be able to participate in opportunities available only to NFPs, such as Amazon Smile, Giving Tuesday, GoFundMe, and other national or franchise charity programs.
• You qualify for many employers’ giving and volunteer matching programs. These programs allow employees to donate money or time to your organization, and they will MATCH a certain percentage of that donation with additional cash. For example, back when I was employed at HCA Parallon, I was able to donate $500 to my school’s Baseball organization, and HCA/Parallon matched that donation 100% and cut a check for an additional $500. They doubled my donation with no additional money out of MY pocket. It’s always good practice to ask your donors to check with their employer’s HR department to see if they have matching programs.

Benefits to Your Donors

• Your business donors can* deduct donations to your club regardless of whether they “get” anything in return. Sometimes, your club may offer advertising opportunities to local businesses in exchange for cash – i.e. placement of the business logo on a t-shirt, sign, event flyers, etc – these are typically deductible to the business as advertising expense. But if they aren’t getting any free advertising, and there is no business purpose for their donation, they cannot deduct their donations to you for income tax purposes UNLESS you are Federally recognized as a Tax-Exempt Organization
• Similar tax benefits apply to individuals. In fact, in 2020 and 2021, the COVID CARES ACT provided for a tax credit for folks who gave to a charitable organization, even if they did not itemize.

You’ll first want to verify you are eligible by clicking the link to Check Eligibility Worksheet (page 13 in this document).

If your organization does meet the requirements, here are the instructions. Start your application here. (you know the drill; register first) My comments are in grey.

Depending upon the expected size of donations you expect, your answers may vary from the below screenprints – make sure you read each question carefully and answer according to your situation.

If you followed the instructions above, you should choose Corporation below, and enter the date you filed with the State of Oklahoma for incorporation date.

Another section regarding mission and activities – have you noticed that they REALLY care that you’re operating as a not for profit in more than “name only”? 🙂

Your NTEE code will vary based on the type of booster club you are organizing. Take advantage of the instructions they provide and choose the one best suited to your org.

Your answers may vary from the below. Again, I recommend you take advantage of clicking on the small question mark icons near each question for clarification on how to respond appropriately.

If you’ve never before applied for Tax-Exempt/NFP status, leave this screen blank. If you are filing for a Reinstatement because your status has lapsed, select the appropriate response.

You need to have a board member or registered third party representative sign your application. After this page, you will navigate to payment, review, and confirmation.

CONGRATULATIONS!

Once you’ve completed these steps and received your approval documents, you’re officially a bona fide tax exempt booster club!