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Nonprofit Law/501(c)3 Gymnastics Booster Club Question


QUESTION: Thank you for the valuable resource that you provide... I think I know the answer to most of these questions, but I would appreciate your opinion.  Our Gymnastics Booster club is a 501(c)3.  Like many other gymnastic clubs, a for-profit company (Gym A) owns the building and equipment and pays the coach's salaries.  The BC operates by fundraising and putting on meets to raise money to support the gymnasts.  The BC pays meet fees for gymnasts and the coach's meet fees and travel expenses when they go to meets.  The BC keeps everything separate from Gym A except for one circumstance.  The BC was told by an attorney a few years ago that we could charge a yearly membership fee but we could not enforce members to fundraise.  We have always had an annual membership fee and a $300.00 per gymnast fundraising fee.  The attorney recommended that Gym A could stipulate in their contract with each gymnast family that they had to be in "good standing" with the BC in order to compete at Gym A.  By "good standing" it is implied that they must meet their fundraising obligations through the BC in order to compete at Gym A.  If a family doesn't meet their yearly fundraising amount, the BC actually charges each family for the remainder before they can participate the next season.  Many of the BC members have been going back and forth on whether this is allowable.  
Question 1: Is this allowable for Gym A to require "good standing" with the BC in order to participate?
Question 2: Can BC require an annual fee and fundraising amount?
Question 3: Can any type of fundraising activity (i.e.: Scrips cards, acquiring sponsors or general sales fundraisers like candy bars) go toward your annual fees or fundraising fees?
Question 4: Can BC purchase banners to be hung in Gym A, showing state championships or former gymnast's accomplishments?
Thank you for your time!

ANSWER: 1.  If the for-profit Gym a requires "good standing" with the BC for youth to participate, then both the BC and the for-profit gym are conspiring to evade tax laws.  My summary of IRS regulations relating to 501(c)(3) booster organizations is at: and you may be interested to read that. There you will see that no family may be required to join a booster organization in order to receive the charitable benefits of such an organization.  The only reason that such an organization would share information with the for-profit gym as to what family is in "good standing" is to try to get around the law for 501(c)(3) organizations.

Such an operation would be what the IRS calls a cooperative.  A
cooperative is not qualified as a 501(c)(3) organization.  A
501(c)(3) booster organization is to be a charitable, not a
cooperative, organization. A charitable organization, like the Red
Cross, does not require beneficiaries to work for the Red Cross in
order to receive benefits.

In August, 2013 the U.S. Tax Court supported the revocation of
501(c)(3) organization status of a formerly exempt organization and
noted that a parent's fundraising was earmarked to reduce what
otherwise could be a $1,400 payment the parent would have to pay
out of his/her pocket. The direct linkage of a parent's fundraising
resulted with paying expenses for that parent's child and was a
very specific benefit obtained by the insider.  While the parent
may not have been paid cash, the parent nevertheless ended up
escaping having to write a check for the amount of the benefit.
Families who did not fundraise did not receive any benefits from
the purported a 501(c)(3) organization.

2. As I have in my summary relating to 501(c)(3) booster organizations, a family can not be required to join a booster organization in order to receive benefits.  But if, voluntarily, a family joins a 501(c)(3) organization, it may be removed from membership if it does not comply with the rules of that organization. Such rules may include a annual fee and fundraising amount.  But note again, if the family  leaves the organization, that booster organization must still give benefits to the youth of the family in the gym in order to maintain 501(c)(3) organization status with the IRS.  

3. Fundraising is only supposed to be done irregularly. See "Fund Raising" at as to the type of "fundraising"  that is allowed to maintain 501(c)(3) organization status and to avoid having unrelated business taxes due from your organization.

4.  The IRS rule for what nonprofits may spend money on is similar to the standard that the IRS uses when determining what is a valid business expense for an ordinary business. For example, at the IRS refers extensively to the regular business expense rules and applies them to 501(c)(3) organizations. A banners extolling the work of the organization is useful to the organization and would, therefore, be allowed if it has the name of the booster organization prominently displayed on it.  Otherwise, it would only be giving benefit to private entities, such as the for-profit gym and would be prohibited under the IRS regulations called "private benefit". An extensive discussion by the IRS of the private benefit issue
relating to 501(c)(3) organizations is found at
Especially note page 8 about a private school benefiting the insiders.

You are welcome.

Harvey Mechanic
Attorney at Law

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.

---------- FOLLOW-UP ----------

QUESTION: Thank you for the quick response and for the valuable information.

One other thing I forgot to ask...Can the Booster Club give gifts to a certain group of gymnasts without having to provide this gift to everyone in the gym?  Example... giving a gift like a jacket or other memento to a gymnast who has reached the highest level of competition.  This is only a small group within the gym (4 out of 130).

This is something that the BC usually does for Seniors in their last year of competition.

Thank you AGAIN!

You are welcome again.

Small gifts are not a problem, but as the value goes up the question arises whether the gifts fulfill a part of the charitable mission of the 501(c)(3) organization. I doubt it and, therefore, the IRS could consider such gifts as private inurement and not funds given to fund youth gymnastics activities. That would be prohibited.

Harvey Mechanic
Attorney at Law

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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