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IRS hits booster clubs in my hometown

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  • Bob Rosebrough
    Lexington, Kentucky Posted on Sun, Aug. 10, 2008 Fund-raising takes a hit By Valarie Honeycutt Spears vhoneycutt@herald-leader.com The tax man is threatening a
    Message 1 of 2 , Aug 11 7:24 AM
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      Lexington, Kentucky
      Posted on Sun, Aug. 10, 2008
      Fund-raising takes a hit
      By Valarie Honeycutt Spears
      vhoneycutt@...

      The tax man is threatening a long-standing practice of Fayette County
      booster clubs — giving parents credit for fund-raising — in a move
      that could have broad implications for extracurricular activities
      nationally.


      The Henry Clay High School band booster club recently paid about
      $30,000 in IRS penalties, and the Lafayette band boosters were hit
      with a $9,000 fine, which they are appealing. The IRS has also
      contacted the Bryan Station baseball boosters.


      At issue is something booster clubs have done for years: giving
      parents credits for working at bingo parlors and concession stands
      and selling items ranging from candles to candy. In many cases, those
      credits are then subtracted from the annual fees parents pay for
      extracurricular activities such as band, cheerleading and athletics.


      But it now appears that the IRS is tightening up on the private, non-
      profit booster clubs, saying benefits to individual parents are
      illegal unless they pay taxes on the money.


      The IRS actions here could have an impact nationally, since most
      booster clubs follow the same procedures.


      "Other booster clubs in Kentucky and from other states have called
      because they have similar procedures," said Brian Kinney, former
      president of the Lafayette band boosters.


      IRS representative Jodie Reynolds said that federal law prohibits the
      IRS from discussing a specific organization's tax issue.


      The practice of giving parents credits to work off fees they would
      otherwise have to write a check for has been widely accepted.


      "Our organizations have had these fund-raisers for years and there's
      never been a problem, so the district is surprised at the IRS'
      position," said Lisa Deffendall, a spokeswoman for Fayette County
      Schools. The district essentially has no authority over the private
      groups.


      Fayette County Schools pays for head coaches and band directors and
      some assistants, but most expenses for sports and extracurricular
      activities are left to the parents.


      Fund-raisers help booster clubs raise hundreds of thousands of
      dollars to pay for uniforms, trips and equipment. In addition, big
      Fayette County booster clubs have paid for some of the nicest
      athletic fields in the state.


      The concern about a process where little is paid by the school
      district is that many students won't get to participate because their
      parents can't afford the fees.


      However, Douglas Romaine, the Lexington attorney who represents
      Lafayette band boosters, said the IRS is concerned about whether
      individual parents receive benefits or whether the fund-raising
      activities benefit the entire group.


      Of all the fund-raisers for booster clubs in Fayette County, bingo
      has traditionally brought in the most money — a total of $6.8 million
      from 2000 to 2005.


      The IRS informed Bryan Station's baseball booster club that it could
      no longer give monetary credit to parents for their voluntary work
      efforts. And that affected the school's band boosters, a group that
      was sharing a bingo night with the baseball boosters.


      "The Bryan Station Baseball Booster Association can no longer
      compensate band members for working bingo," club members were
      informed in a newsletter. "Therefore, we can no longer participate in
      bingo as a dependable monthly fund-raiser.


      "So it looks like the keeper of the taxes (IRS) has brought on the
      death of bingo."


      Romaine said what has happened with the Lexington booster clubs "is a
      significant issue in the tax-exempt organization arena."


      At both Henry Clay and Lafayette, officials said every child is
      treated the same regardless of whether the family raises money for
      the club.


      "If a child can't afford it, all they have to do is tell the director
      and it's taken care of," said Scott Nicewarner, president of the
      Henry Clay group.


      Romaine said the IRS is engaging in "piecemeal policing," sanctioning
      some groups but not others.


      "The IRS has not given any guidance to the booster clubs," Romaine
      said.


      Paying the price


      Lafayette Band Association Inc. one of the largest band booster clubs
      in the state, is appealing the $9,000 IRS penalty it received for
      2007, in the process racking up twice that much in legal fees, said
      Kinney, the booster club's former president.


      The Lafayette group was audited a few years ago and told that it was
      doing everything right, Kinney said.


      When it was audited again in 2007, the IRS found fault with the same
      practices that were previously approved, said Kinney. The group
      raised about $300,000 through fund-raising and fees in 2007, he said.


      The fees in the Lafayette band are $900 per student each year. That
      covers all expenses, including uniforms, instruments and repairs on
      instruments, hotels, instructors and countless other extras that it
      takes to maintain a 200-person student band, Kinney says.


      The band has won 14 state championships.


      The Henry Clay band boosters, who brought in about $150,000 in 2007,
      never expected to pay a $30,000 penalty to the IRS.


      "We are just a bunch of parents trying to raise money because the
      school district doesn't fund a musical education for our children,"
      said Nicewarner,


      "We didn't follow the letter of the law," he said, "and, even though
      it was out of ignorance, the right thing to do was to pay it."


      Nicewarner said the booster club paid the penalty so that the IRS
      would not go after individual families.


      "They were selling cookies, candles, flowers and fruit, and then to
      penalize them, it was causing major stress with the parents," he said.


      Henry Clay Band members pay anywhere from $75 to $350 in fees
      annually, depending on how many band activities they participate in.


      The club did extra fund-raising to make up for the $30,000.


      Will students still play?


      Jim Carroll, a spokesman for the Kentucky Department of Charitable
      Gaming, said that under state law, everyone who works bingo for a
      club is a volunteer and no individual is allowed to be compensated.


      The Lafayette and Henry Clay band booster groups and the Bryan
      Station baseball booster group are all in good standing with the
      state, he said.


      Meanwhile, boosters at both schools have stopped giving parents
      credit for fund-raising.


      At Lafayette, all money raised goes into one pot and every family
      must pay the same amount in fees. Parents have less motivation to
      help with fund-raising, Kinney said, and some parents are questioning
      whether they can afford for their children to participate.


      "It will deter students from joining the band," said Kinney.


      At booster club training sessions, district officials are telling
      booster clubs to work with their accountants.


      Kinney said the Lafayette boosters are trying to figure out how to
      entice parents to help raise money without offering credits.


      "We are going to do something to counter," Kinney said. "but we don't
      know what."
    • joanpontius
      what do they do for boosters who aren t parents of kids playing in those sports.
      Message 2 of 2 , Aug 13 6:18 PM
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        what do they do for boosters who aren't parents
        of kids playing in those sports.




        --- In howardpubliced@yahoogroups.com, "Bob Rosebrough"
        <bobrosebrough21045@...> wrote:
        >
        > Lexington, Kentucky
        > Posted on Sun, Aug. 10, 2008
        > Fund-raising takes a hit
        > By Valarie Honeycutt Spears
        > vhoneycutt@...
        >
        > The tax man is threatening a long-standing practice of Fayette County
        > booster clubs — giving parents credit for fund-raising — in a move
        > that could have broad implications for extracurricular activities
        > nationally.
        >
        >
        > The Henry Clay High School band booster club recently paid about
        > $30,000 in IRS penalties, and the Lafayette band boosters were hit
        > with a $9,000 fine, which they are appealing. The IRS has also
        > contacted the Bryan Station baseball boosters.
        >
        >
        > At issue is something booster clubs have done for years: giving
        > parents credits for working at bingo parlors and concession stands
        > and selling items ranging from candles to candy. In many cases, those
        > credits are then subtracted from the annual fees parents pay for
        > extracurricular activities such as band, cheerleading and athletics.
        >
        >
        > But it now appears that the IRS is tightening up on the private, non-
        > profit booster clubs, saying benefits to individual parents are
        > illegal unless they pay taxes on the money.
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