The short answer
A booster club, PTO or youth league is simply a group of volunteers raising money for a school or program. Nothing stops it from opening a bank account and holding a bake sale. The question is whether it is recognized as tax-exempt under section 501(c)(3), which is what lets donors deduct gifts and lets the club itself avoid federal income tax on what it raises.
The IRS makes an exception for the smallest groups. An organization whose gross receipts are normally not more than $5,000 can be treated as a 501(c)(3) without filing Form 1023 or Form 1023-EZ. Above that level, a group that wants 501(c)(3) treatment has to apply and receive a determination letter.
What 501(c)(3) status actually unlocks
Volunteers often apply because “everyone says we should.” It helps to know exactly what the letter does for you, so you can explain it to your board.
- Deductible gifts: donors can deduct contributions, and your acknowledgment letters mean something to them.
- Massachusetts sales tax on purchases: DOR issues a Certificate of Exemption (Form ST-2) to 501(c)(3) organizations, and the application asks for your name and EIN exactly as they appear on the IRS determination letter.
- Credibility: school districts, businesses and community foundations often ask for the determination letter before they sponsor or grant.
- A clean answer on the annual 990-series return and the Massachusetts Form PC, both of which ask about exempt status.
Raffle permits in Massachusetts do not turn on 501(c)(3) status. They depend on the kind of organization you are and on having operated as a nonprofit in the state for at least two years. See the raffle guide in this hub.
The $5,000 exception, and what it does not excuse
Being small enough to skip the application does not make a club invisible. It still files the annual Form 990-N (e-Postcard) with the IRS, and missing three years in a row still leads to automatic revocation.
On the state side, the Attorney General's Non-Profit Organizations/Public Charities Division expects public charities operating or raising money in Massachusetts to register and file Form PC after their first year, whether or not they are incorporated. The Certificate of Solicitation has its own, separate small-group exemption, covered in its own guide.
Sales tax is the awkward one. The DOR regulation on casual and isolated sales says groups under the section 508(c) exception do not need an ST-2 to buy tax-free for exempt use. But DOR's process for issuing an ST-2 is built around an IRS determination letter, so check with DOR before relying on the exception at a store register.
Form 1023-EZ or Form 1023
Most booster clubs that apply use the streamlined Form 1023-EZ, if they pass its eligibility worksheet. Fees are the IRS user fees in effect for 2026.
| Form 1023-EZ | Form 1023 | |
|---|---|---|
| IRS user fee (Rev. Proc. 2026-5) | $275 | $600 |
| Gross receipts test | Projected not over $50,000 in each of the next 3 years, and actual not over $50,000 in each of the past 3 years | No ceiling |
| Assets test | Total assets not over $250,000 | No ceiling |
| How it is filed | Electronically through Pay.gov; fee paid there | See the IRS Form 1023 page |
| Who signs | An officer, director or trustee (not a power-of-attorney representative) | An officer, director or trustee (not a power-of-attorney representative) |
PTA units, PTOs and umbrella programs
A PTA unit is part of a state and national association. The Massachusetts PTA says its local units are covered under the association's group exemption and that it now issues the exemption letters, so a PTA treasurer's first call is to the state PTA, not the IRS.
A PTO, booster club or independent youth league is on its own. It applies for its own recognition and files its own returns. It cannot start its own umbrella either: the IRS says it is not currently accepting requests for new group exemption letters.
A practical way to decide
- 1.Add up gross receipts for each of the last three years, before any expenses. Concessions, apparel sales, dues and sponsorships all count.
- 2.If the total is normally $5,000 or less and nobody is asking for a determination letter, you may operate as exempt without applying. File the 990-N every year anyway.
- 3.If you are above $5,000, or expect to be, run the Form 1023-EZ eligibility worksheet in the IRS instructions.
- 4.Check your governing documents. IRS Publication 557 explains that your purposes should be limited to exempt purposes and that a dissolution clause dedicating assets to exempt purposes helps the review.
- 5.Have an officer, director or trustee sign and pay the user fee on Pay.gov.
- 6.When the determination letter arrives, keep the original with the club's permanent records and apply for the Massachusetts ST-2 through MassTaxConnect.
Where we come in
Murphy Accounting prepares the financial information an application asks for, organizes the club's records, and prepares the annual 990-series return and Massachusetts Form PC afterward. An officer signs the application; the IRS decides it. We give you a scope and a price in writing before anything starts.
Figures on this page were checked against the IRS and Massachusetts sources listed alongside on 28 Sep 2026. They change — confirm the current amount before relying on one.
General information for owner-led businesses, not advice for your specific situation. Tax and accounting rules change, and how they apply depends on facts particular to your business. Talk to us — or to another qualified professional — before acting on anything here.
