Nonprofit Law/Buy Out Options


QUESTION: I am trying to find out if a 501c3 booster club can require it's booster club members to either participate in a sales based fundraiser or buy-out of the participation?

ANSWER: There is a preliminary issue that most 501(c)(3) booster organizations do not consider.  That is that such an organization may not require families to become members and, therefore, can not consider membership as a consideration in making grants for youth sporting activities.  As for your specific question, it may not require fundraising or 'buy-outs".  If it did, then 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.

My summary of IRS regulations relating to 501c3 booster organizations is at: and you may be interested to read that.

Harvey Mechanic
Attorney at Law

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

QUESTION: Thank you for the quick response.  

In follow up, if the families voluntarily choose to be members, then the question stands of as a voluntary member, can the fundraising guidelines of the booster club require participation in sales based fundraising or buy-out option for non-participation?

The IRS has not had any published cases specifically on point, but my opinion is that a booster organization may have that policy as long as the club does not discriminate against non-members in making grants.  For example, a 501(c)(3) booster organization may enroll members and require a $1000 membership fee or hours of work in lieu of payment of that $1000 fee.

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


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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