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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22358
Experience:  Taxes, Immigration, Labor Relations
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Upon assisting a Band Booster organization last week; I discovered

Resolved Question:

Upon assisting a Band Booster organization last week; I discovered that they have been raising monies each year to help out the school band. They have not ever reported any of the funds received nor expenditures to "anyone", neither the school or IRS or ? This has been going on for approx 22 years with annual income & expenditures averaging around $30,000 to $40,000 per year. (lots of "cash) !!!! They are a loosely group of people without a FEIN, etc.

Shouldn't they have filed some kind of tax return, information or otherwise???

Please Advise!!!! Thanks a lot Douglas Wadkins XXX@XXXXXX.XXX
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.

LEV :

Hi Douglas and welcome to Just Answer!
Under Arkansas law, most charities that solicit donations in the state of Arkansas must be registered with the Consumer Protection Division.
The second issue is that donations given to unregistered organization are not tax deductible.

LEV :

If a charitable group seems suspicious, or if you want to file a complaint against a charity, you may contact the Attorney General's Office>
If a Band Booster organization provide receipts with tax deduction - that may be reported to the IRS.

Customer:

They usually don't solicit any donations. They buy drinks, food, + other items then resale them and use the profit to buy things for the band; .i.e uniforms, drums, trips, etc.

Customer:

see my explanation above - jacustomer

LEV :

Generally, organizations required to apply for recognition of exemption must notify the Service within 27 months from the date of their formation to be treated as described in section 501(c)(3) from the date formed.
Without 501(c)(3) nonprofit status - all activities are classified as for-profit activities and a Band Booster organization should be classified as a partnership.
It is required to account for income and expenses and pass prorated taxable income to partners.

LEV :

My understanding is that a Band Booster organization is acting as a nonprofit organization without proper registration.

Customer:

That is what it seems to me: They are acting as a nonprofit org, but without proper approval. Even then, a nonprofit org should file an annual tax return Form 990 ?

LEV :

That is correct - but because a Band Booster organization did not receive a tax exempt status - it will be treated as a partnership.

LEV :

To apply for recognition by the IRS of exempt status under section 501(c)(3) of the Code, use Form 1023, Application for Recognition of Exemption, and its instructions. The application must be complete and accompanied by the appropriate user fee. See Application Process for a step-by-step review of what an organization needs to know and to do in order to apply for recognition by the IRS of tax-exempt status.

Customer:

GOTCHA !!!!!! Thanks for confirming my thinking!!!!!!!

LEV :

See also - Charity Registration - under Arkansas state laws.

LEV :

If you want to correct the situation - registrations with the IRS and the state should be completed.

LEV :

An exempt organization (other than a private foundation) that normally has annual gross receipts of $50,000 or less ($25,000 for tax years ending before December 31, 2010) and therefore is eligible to file an annual electronic notice Form 990-N instead of an annual information return).

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22358
Experience: Taxes, Immigration, Labor Relations
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