Dear Nonprofiteer, Can we make Booster Club parents "Play or Pay"?

Dear Nonprofiteer, Can we make Booster Club parents "Play or Pay"?

Dear Nonprofiteer:

My daughter’s high school band has a contract with a local music venue under which the band operates two refreshment stands at the venue and in return receives a percentage of food and beverage sales. This produces a profit of more than $50,000 per year, so it’s important to the group.

We have a problem with parents who do not volunteer at all for this, or any other fundraising event held to raise money to offset the cost of band fees each year. Can we institute a “play or pay” policy so every band parent must give either time or money?

I have been advised by the band director, as well as a member of the band booster association, that “yes, we can initiate a ‘play or pay’ clause for those parents who don’t volunteer, with payment set based on the value of the time the rest of us volunteer.” I’ve also been told, “no, we cannot force people to volunteer by this means since we are a 501c3 organization.”

Can you clarify which is the correct answer? Without more volunteers we may have to forfeit our concession contract. But requiring people to volunteer seems to be prohibited, or maybe just complicated.

Signed, One of the Ones Who Does All the Work

Dear One,

A lawyer named Ellis Carter explained the situation clearly in a posting on his blog Charity Lawyer, and the Nonprofiteer will borrow liberally from his explanation in justifying her answer, which is NO, you may NOT institute a “play or pay” requirement because for the booster club to be a proper 501c3 charity it can’t do anything to benefit particular individuals who are involved with it; it must distribute its largesse equally among all the members of the band. So even if someone’s parent is a lazy bum and a cheapskate, that young person still gets to be in the band and get an equal share in the benefits which flow from fundraising for the band. Otherwise, the booster club would be engaging in “private inurement,” strictly a no-no under the Internal Revenue Code: a charity has to operate in the public interest, not in the interest of the few individuals directly involved with its operation. And of course this goes double if it’s a public school: every child enrolled in a public school gets to participate in all of that school’s activities regardless of ability to pay. That’s why they’re called “public.”

A certain amount of cooperative fundraising by boosters is permitted, but it can’t constitute a major portion of the charity’s revenue, which yours apparently does. The Nonprofiteer isn’t clear exactly why this prohibition is structured as it is, but she thinks it doesn’t matter because you have another, much bigger problem.

The work that you’re doing for the music venue (presumably for-profit) had better benefit the booster club and the band more than it benefits the venue, or the IRS will regard what the boosters are doing as a profit-making activity prohibited by the club’s 501c3 status. If you’re getting $50,000 from the labor you’re providing to the venue but the venue is earning $500,000 from that labor, this is not a kosher arrangement regardless of how many volunteers you have. For-profit businesses may, of course, donate to nonprofits; they don’t get to exploit nonprofit groups for their own bottom line.

If you want to get around all this (this is the Nonprofiteer talking now, not quoting Mr. Carter’s wisdom), consider turning the booster club into a formal membership organization; those are mostly covered by section 501c6 of the tax code. Membership organizations may charge members whatever they choose, and may include provisions such as, “The $500 annual membership fee will be waived for any member who completes 50 hours of labor annually on Booster Club projects.” On the other hand, donations to membership organizations are not tax-deductible. On the third hand, a membership organization is allowed to have a relationship with a for-profit venue of the kind you describe. Don’t you wish the Nonprofiteer had fewer hands?

If you’re willing to give up tax deductibility of contributions, you’ll get most of what you want: the opportunity to enforce participant behavior through membership as well as the continued flow of funds from the for-profit venue. But if parents refuse to join the Booster Club when it’s reconstituted as a genuine club, with members and non-members, you can’t compel them to do so. All you can do is have a full and frank discussion with all band parents and lay out the need for funding to continue the band program, the inequities presented by the current system, and options for modifying that system, and let the boosters fall where they may.

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    So, if a booster club is asked by staff to collect student fees for art supplies, then turns the fees over to the teaching staff, is this legal? Continuing letters requesting funds from parents who cannot pay and also receiving funds from the district, seems like a double dip. Considering it’s an art school In a public school system. Is this really a 503c or just a front?

  • In reply to Ton gen:

    I don't have enough facts to answer. It's certainly legal for a booster club to solicit contributions from parents, and unless there's some reason to believe the teachers are pocketing the money, it makes sense that they would be the ones to purchase the necessary materials for class. No student, however, can be kept from a public school class for their parents' failure to make such a contribution. So parents who cannot pay should just ignore the letters, however annoying they are. Most public schools are sufficiently underfunded that teachers use their own money to purchase necessary supplies, so it's reasonable to ask parents to help defray these costs. Again, though, they don't have to. There's no "double-dip" about it--the school district SHOULD pay enough for supplies, but if it doesn't, and if the choice is between the purchase price's coming out of [generally low] teacher salaries or out of the voluntary contributions of parents with money, the Nonprofiteer votes for the latter. And unless the money is going in but supplies are failing to come out, it's not a front, either.

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    so, let me understand ... my child’s booster club at a public school for a sports team has issued a demand: either sell tickets to our fundraiser or pay the cost of the tickets yourself. they’re making the selling and/or purchasing of tickets mandatory, saying it’s to offset the cost of operating the team. however they have not spelled out any consequences for noncompliance (not joining the club, not selling or buying tickets to the fundraisers). what consequences can they legally implement on students if their parents refuse to pay or participate?
    also, i suppose the more relevant question is: can they make it mandatory for parents to join a booster club and then either pay or work for the club?
    thanks

  • In reply to Leubna Asad:

    No, they cannot make mandatory any requirement to pay or participate: it's a public school, so children can't be excluded from activities on the basis of failure to pay. We settled this question--that school should be free--in the 19th Century. The geniuses behind the scheme you describe haven't "spelled out any consequences for noncompliance" because there aren't any, and there aren't any by law. If they complain, tell them to shove it and then tell them to talk to your lawyer. Public means public, and public means free.

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    Nonprofiteer

    The Nonprofiteer is Kelly Kleiman, principal of NFP Consulting, which provides Board development, strategic planning and fund-raising services to charities and philanthropies. Through her consulting practice and in her guise as The Nonprofiteer, Kelly has spent the past 25-plus years helping small and mid-sized nonprofits organize themselves better and raise more money. These days she focuses especially on helping them use high-skill volunteers. Kelly is also a lawyer and freelance journalist whose reportage and essays have appeared in the New York Times, Wall Street Journal, Washington Post, Christian Science Monitor and other dailies; in magazines including In These Times and Chicago Philanthropy; in the alternative press; on websites including the Huffington Post; and on the radio, including the BBC and WBEZ Chicago Public Radio. She and her fellow "Dueling Critic" Jonathan Abarbanel present a weekly podcast of their reviews of Chicago theater at DuelingCritics.net. Earlier in her career she was dean of admissions of IIT Chicago-Kent College of Law and Executive Director of the Chicago Children’s Choir, and practiced real estate and zoning law with the firm of Rudnick & Wolfe. Kelly holds undergraduate and law degrees from the University of Chicago. She was a founding Board member of the Association of Consultants to Nonprofits and also served for 5 years on the Board of the Association for Women Journalists–Chicago. She can be reached ("Dear Nonprofiteer . . .") at KellyNFP@yahoo.com.

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