• A sanctioned organization cannot insinuate that it is representing the school district or obligate the district

• Vendors should be aware that they are doing business with a parent-teacher booster organization, not the district

• Boosters should consider a surety bond for officers with financial duties

  • If an organization’s treasurer mishandles money the district cannot provide legal assistance or relief.

  • The district can revoke or suspend sanctioning and require future fundraising activities to be managed through school district activity funds.

• Officers of a sanctioned organization are not covered by District insurance

Financial Issues

Information provided by RFR, Karen Long, Attorney representing Stillwater Public Schools

Part I: Paying & Collecting Sales Tax Issues

Paying Sales Tax

Organizations are required to pay sales tax on their purchases UNLESS you are in an exempt category. Buyers are exempt from paying sales tax under the following circumstances:

· Organization is a 501(c)(3)

and

· Organization is a “parent-teacher organization or association”

The 501(c)(3) requirement is one reason that all booster clubs and PTAs should consider becoming 501(c)(3)s. You must request an exemption certificate from the Oklahoma Tax Commission to be able to claim that you are exempt from paying sales tax.

Collecting Sales Tax Issues

You must collect taxes on the sales on purchases of goods and services if your Organization is the seller unless your organization falls under an exemption from collecting sales tax for governmental and nonprofit entities. Title 68 Oklahoma Statutes Section 1356 (13) lists sales made by the following as exempt from collection of sales tax on the sale:

• • • A public school

    • A private school offering instruction for grades kindergarten through 12th grade

    • A public school district

    • A public or private school board

    • A public or private school student group or organization [regardless of whether or not the group is a 501(c)(3) or not]

    • A parent-teacher association or organization [regardless of whether 501(c)(3)]

    • Public or private school personnel for purposes of raising funds for the benefit of a public or private school, public school district, public or private school board, or public or private school group or organization

• All PTAs are exempt from collecting sales tax on items sold because they are clearly a parent-teacher association. The issue with regard to booster clubs is whether they are a “parent-teacher organization.”

  • • If a booster club has some teachers that are legitimately a part of the group there is an argument that the booster club is a “parent-teacher organization”.

    • As a result, booster clubs are encouraged to:

      • • Obtain 501 (C)(3) status; and

        • Use as a part of the name of the club “parents and teachers organization”

          • • • For example: “Stillwater Parents/Teachers Basketball Booster Organization”

        • This would enable a booster club to go to the Oklahoma Tax Commission (OTC) and say:

          • • • “We are a parent-teacher organization”

              • “The Articles of incorporation and bylaws say that our booster group is a parent-teacher organization”

              • “Our organization documents say we are a parent-teacher organization”

Final Summary of Sales Tax Issues

• If your organization is buying items, then to avoid paying sales tax to the vendor, your organization must be:

  • • A 501(c)(3)

and

• • • A Parent-Teacher Organization

• If your organization is selling items, then to avoid collecting sales tax, your organization must be:

  • • A Parent-Teacher Organization

    • (There is no 501(c)(3) component to this)

The only way to deal with both sales tax issues is to be both a parent-teacher organization and a 501(c)(3).

Part II: Transactions with Employees of Stillwater Public Schools (Hiring, etc.)

• Booster clubs and PTAs are not allowed to hire, employ, or pay school district employees or anyone else (coaches, technicians, independent contractors, choreographers, etc.) to do things to benefit the booster club or the school sport or activity unless approved by the school district. District requirements and Title IX requirements must be met.

• Beyond raising Title IX issues, these hires also implicate serious state and federal tax issues.

• The IRS has taken the position that payments to district employees by sanctioned organizations for services or gifts are subject to income and employment taxes as if they had been paid by the District. Payments for services related to an individual’s employment with the school district should be subject to all applicable withholdings.

• Payments for services related to the teacher's or sponsor's employment with Stillwater Schools should be made through the District’s payroll system in order to comply with IRS regulations. The organization will reimburse the District the compensation amount plus employer FICA.

• Gifts related to the teacher’s or sponsor’s employment with Stillwater Schools are also considered taxable compensation. The exception is de minimus gifts of items (clothing, flowers, plaques, etc.) that are given on occasion like the end of season or for a holiday.

• Gifts of cash or gift cards related to the teacher’s or sponsor’s employment with Stillwater Schools are never excludable from income. Payments to district employees in cash or gift cards should not occur unless approved through the district.

• District employees may be reimbursed for qualified business expenses without tax consequence. Such expenses must have appropriate receipts to substantiate the business purposes.

• If a sanctioned group wishes to give a teacher a gift card to purchase supplies without it being taxable to the teacher, the card should be donated to the school and kept in the school’s financial office. The teacher can then check out the gift card and return the appropriate receipts which substantiate the business purpose of the purchases.

• See “Stipends Paid by Sanctioned Organization” handout at the end of this document for more information about payments to individuals.

Part III: Section 501(c)(3)

The concept of becoming tax exempt under Section 501(c)(3) of the Internal Revenue Code is strictly a federal income tax and gift and estate tax issue. A section 501(c)(3) ruling is a ruling by the IRS which determines that the booster club is generally exempt from income tax on the income which it earns and is a ruling which advises contributors that their gifts to the booster club are deductible for federal income, gift, and estate tax purposes. PTAs that are members of the National Parent Teacher Association are exempt under a group and national exemption. More information on the criteria and process for applying can be found in IRS Publication 557. There are both benefits and detriments to obtaining 501(c)(3) status.

Benefits:

1. All income earned by the booster club is tax exempt. Absent such classification, the income of the booster club is subject to taxation.

2. All contributions made to the booster club are tax deductible to the donor. If the booster club is not a recognized 501(c)(3) then the contributions are not deductible.

3. It is generally recognized that corporations and foundations that make gifts to charities require, as part of their gift giving guidelines, that the charitable recipient be sanctioned under Section 501(c)(3) of the Internal Revenue Code.

4. Title 18, Section 867 offers broad protection from liabilities of directors of nonprofit corporations that are exempt from tax under 501(c)(3). This protects individual members from personal liability for damages resulting from (a) a negligent act or omission of an employee or nonprofit or (b) any negligent act or omission of another director.

5. 501(c)(3) status helps establish an exemption from paying sales tax.

Detriments:

1. Legal, accounting and filing fees to apply for 501(c)(3) status takes time and may be costly.

   1. 1. • Filing a nonprofit Certificate of Incorporation with the Secretary of State,

         • The creation and adoption of by-laws for the corporation;

         • The preparation and filing of an application with the IRS requesting the IRS to determine that the booster is tax exempt

           1. • Generally, the cost, including filing fees, is $3000 - $3500.

              • If the booster club anticipates having annual gross receipts less than $50,000, then the applicant can file online, using IRS form 1023 EZ

              • The application is a difficult application to submit

              • The application requires financial information as well as projections of financial information

2. There is an annual filing requirement (IRS Form 990).

   1. 1. • Most tax-exempt organizations with gross receipts of $50,000 or less are not required to file Form 990 or 990-EZ if they electronically submit Form 990-N (e-Postcard) annually.

         • Failure to file for three consecutive years triggers automatic revocation of tax-exempt status and could result in penalties.

         • The assistance of an accountant or tax attorney is recommended

         • Lack of continuity can be a problem if incoming officers do not understand their filing obligations or if correspondence continues to go to the outgoing officers.

Part IV: Online Alternatives to support Boosters (No warranties expressed or implied based on the mention of this. Reports have been received regarding the ease and affordability of use.)

Parent Booster USA (PBUSA)

PBUSA touts that joining is quick, easy, and inexpensive. And, that Federal 501(c)(3) tax-exempt status is immediate.

• Go to parentbooster.org

• Select “Join Now”

• $495/startup for 501(c)(3) status upon approval, IRS EIN

• $345/maintain your 501(c)(3) status by filing IRS form 990N with increased fees if a 990EZ or full 990 form are required.

• There are a number of free resources on the website and additional support center tools if you are a member.

Title IX Issues

Title IX Issues (Gender Equity in School Sports)

Title IX of the Education Amendments of 1990 provides: “No person in the United State shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity regarding federal financial assistance.”

Under Title IX, all donations (money or in-kind contributions) must be monitored by the school district and boosters, and booster clubs must cooperate with monitoring.

Stillwater Public Schools has the ultimate responsibility for Title IX compliance. In cases on non-compliance, the argument that a booster club provided funding that the District could not is not a legal defense. Title IX compliance encompasses the areas of trips, camps, facilities, equipment, coaches, uniforms, meals, tournaments, banquets, student awards, and letter jackets.

More complete information about how Booster clubs can affect Title IX compliance can be found here.

Recommended internal controls

All booster clubs and parent organizations are encouraged to follow the guidelines below:

1. All activities (fundraising and proposed expenses) should be voted on by the club or organization and recorded in the club’s minutes.

2. All checks issued by the club should bear the signatures of the club’s treasurer and one other officer. No school employee is authorized to have his/her name on any club or organization financial account.

3. All expenses should have documented proof (a receipt or invoice). The check number and date of payment should be written on receipt or invoice. Each month, the club minutes should reflect membership approval of all bills paid.

4. A fundraising income/loss statement should be completed and submitted to the club for approval and recorded into the club’s minutes.

5. A monthly financial statement should be submitted at each club meeting for approval and recorded into the club’s minutes.

6. At the end of the year, the club treasurer should submit a financial report demonstrating all activities for the year.

7. The president should appoint an internal audit committee and the appointments should be noted into the club’s minutes. Club officers should not be a member of the internal audit committee. The internal audit committee should conduct an annual audit of the club’s financial records for the year ended. This audit should be completed prior to the transfer of financial records to the next treasurer. The audit should be performed by someone who is independent from day-to-day financial activities. Ideally, this audit should be performed by a group of three individuals; however, if the membership size does not allow, the audit may be performed by two individuals.

8. The club should obtain a bond to cover all club officers who are permitted to handle checks and depositing of funds.

9. All money collected should be counted by at least two club representatives before forwarding the funds to the treasurer for deposit. The club representatives should sign a money collection report.

10. All monies should be deposited into the bank within 24 hours of collection.