Parent Booster USA Revises IFA Policy

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Parent Booster USA is providing new guidance to school support organizations on the use of individual fundraising accounts (IFA) through which students and their parents are "credited" for fundraising activities. PBUSA notes that while IRS rules regarding IFA's are unclear, the IRS is known to find these types of cooperative fundraising activities to be illegal.

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While the IRS often finds IFAs illegal, the IRS has stopped short of issuing a strict rule prohibiting cooperative fundraising activities,” notes Sandra Englund, founder of Parent Booster USA. "This makes it difficult to advise school support groups."

Parent Booster USA has revised its IFA (individual fundraising account) policy and guidance for school booster clubs. The new policy strongly urges booster clubs to eliminate or significantly limit activities aimed at aiding individuals raise funds to cover their personal expenses.
It is common practice for school support organizations – band and other music boosters, sports boosters, and similar organizations – to credit their volunteers for working concession stands or for part of the proceeds earned from other fundraisers. Booster clubs say its difficult, if not impossible, to get volunteers to help unless credit is given for their efforts. Many students cannot afford to go on band trips unless they are given the opportunity to raise the money needed to cover trip costs.

The IRS, however, has found that these types of cooperative fundraising programs violate IRS rules. Lois Lerner, Director of Exempt Organizations for the IRS, reportedly has said that any booster club that raises money to benefit an individual rather than the group as a whole is in violation of federal law and stands to lose its tax-exempt status.

“While the IRS appears to believe IFAs are illegal, the IRS has stopped short of issuing a strict rule prohibiting cooperative fundraising activities,” notes Sandra Englund, founder of Parent Booster USA, a national umbrella organization for PTOs and other school support groups. “Nevertheless, PBUSA felt it needed to issue a policy that informs booster clubs how risky cooperative fundraising programs are.”
More information and guidance regarding fundraising practices for school booster clubs is available on PBUSA’s website at http://www.parentbooster.org.

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Sandra Pfau Englund