Dissolving or Merging a Booster Club: Steps, Assets, and Filings

Dissolve, Merge, or Go Dormant

Dormancy is risky. The IRS automatically revokes the exemption of an organization that does not file its required Form 990-series return or notice for three consecutive years, effective on the due date of the third return. A dormant club must keep filing. See Losing and Regaining 501(c)(3) Status.

Where the Money Must Go

A 501(c)(3)’s assets are permanently dedicated to charitable purposes. The Form 1023 instructions explain that if an organization dissolves, its assets must be distributed for an exempt purpose described in section 501(c)(3), or to the federal government, or to a state or local government, for a public purpose. The club’s articles of incorporation and bylaws should contain a dissolution clause saying the same. See What Booster Club Bylaws Must Include.

In practice, booster clubs give their remaining assets to:

• The school district, for the program the club supported. A public school district is a unit of local government. District guidance anticipates this: California’s Fiscal Crisis and Management Assistance Team (FCMAT, a state agency that advises school districts) says a club’s governing documents should provide for distributing excess funds to another nonprofit, the student body organization, or the district, and some district booster manuals say the same.
• Another booster club or parent organization that is a 501(c)(3) and supports the same students.
• A local education foundation that is a 501(c)(3).

Assets may never be distributed to officers, members, or families, including as refunds of fundraising proceeds. Donor-restricted gifts should go to a recipient that will use them for the restricted purpose.

Step by Step

1. Board recommendation. The board reviews the articles, bylaws, and state law for the required vote, adopts a resolution recommending dissolution or merger, and names a proposed recipient of the assets.
2. Notice to members. The secretary gives notice of the membership meeting as the bylaws require, stating the proposal.
3. Membership vote. The members vote as the bylaws and state law require. The secretary records the vote in the minutes.
4. Notify the school. The president informs the principal and follows any district procedure for closing a booster club.
5. Stop new fundraising. The club finishes or cancels existing commitments and stops accepting new obligations.
6. Collect and pay. The treasurer collects money owed to the club, pays all debts, files any final sales tax or payroll returns, and cancels contracts.
7. Honor restrictions. Restricted fundsRestricted fundsMoney a donor or grantor gave for a stated purpose. The club tracks each restricted balance separately, reports it in the treasurer’s report, and spends it only on that purpose.All terms are spent for their purpose or transferred to a recipient that agrees in writing to honor the restriction.
8. State filings. The club completes its state’s dissolution steps (see below).
9. Distribute the assets. The treasurer transfers the remaining money and property to the approved recipient and gets a written receipt. For a gift to the school, the district’s acceptance procedure applies. See How a Booster Club Works With the School and School District.
10. File the final federal return. See the next section.
11. Close accounts. The treasurer closes the bank account after the last check clears, and the officers close payment processors, cancel insurance after asking the agent about coverage for claims reported later, and release or transfer the domain and email.
12. Preserve records. The board names a custodian (often the secretary or the recipient organization) to keep the permanent file and financial records. See Records and Document Retention.

The Final Federal Return

Notice of termination closes the organization’s account in IRS records. How the club notifies the IRS depends on which return it files:

Schedule N (Liquidation, Termination, Dissolution, or Significant Disposition of Assets) asks for a description of the assets distributed, the date, their fair market value, and information about each recipient. It also asks whether any officer or director is, or is expected to be, involved with the recipient organization, and requires an explanation if so.

Attachments. A Form 990 or 990-EZ filer must attach a certified copy of its articles of dissolution or merger approved by the state. If that is not available, it attaches the governing body’s resolution approving the plan of dissolution or merger.

Due date. The final return is due by the 15th day of the 5th month after the dissolution, not after the normal fiscal year end. A club that dissolves on March 31 files by August 15. A club that dissolves on June 30 files by November 15.

See Which Form 990 a Booster Club Files for which return applies.

State Filings

State requirements vary widely. Common steps include:

• Filing articles of dissolution (or a certificate of dissolution) with the secretary of state, for an incorporated club.
• Notifying the state attorney general. IRS Publication 4779 notes that organizations in certain states must notify the attorney general or another state office of their intent to dissolve. In California, for example, a public benefit corporation must obtain the Attorney General’s written waiver of objections to the distribution of its assets (or confirmation that it has no assets) before the Secretary of State will finalize the dissolution.
• Filing a final report with the state charity registration office.
• Closing state tax and sales tax accounts.

The club’s state page lists the agencies and forms.

Unincorporated clubs have no articles to dissolve with the state, but the IRS notification, the asset distribution rules, and any state tax or charity registration closures still apply.

Merging Into Another Organization

A merger can be a formal corporate merger filed with the state, or a simpler transfer of all assets to the surviving organization followed by dissolution of the transferring club. Either way:

1. Confirm the surviving organization is a 501(c)(3) whose purpose covers the students the club served.
2. Agree in writing on what transfers (money, equipment, restricted fundsRestricted fundsMoney a donor or grantor gave for a stated purpose. The club tracks each restricted balance separately, reports it in the treasurer’s report, and spends it only on that purpose.All terms, contracts, the club’s name) and how the surviving organization will honor restrictions.
3. Vote under each organization’s bylaws.
4. Complete the state merger or dissolution filing.
5. File the transferring club’s final return with Schedule N, disclosing any officers who will serve the surviving organization.
6. Notify members, sponsors, and the school.