Since the 1990s, the Henry Clay Booster Council has raised tens of thousands of dollars for groups such as swim team, Junior ROTC, cheerleading and softball.
Most of that money was raised through bingo — long the preferred fund-raising activity for athletic and school booster groups throughout Fayette County.
But a $30,000 fine from the Internal Revenue Service led directors of the Henry Clay Booster Council not only to stop using bingo as a fund-raiser, but to vote to disband altogether.
So far, IRS fines have reached at least $130,000 for school booster clubs at three Fayette County high schools. Now some of those groups are exploring fund-raising options other than bingo — for example, looking at corporate sponsors to help raise money for extracurricular activities.
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Others are taking more extreme steps.
After the IRS fine, "we had a lot of volunteers who decided not to participate," said Sharon Wesley, a director of the Henry Clay Booster Council. "They basically felt like they were working to pay the IRS."
Wesley said it's unclear what will happen to replace the council's fund-raising. She said that will be up to the individual extracurricular groups.
"They're all on their own," she said.
The IRS is penalizing Fayette County booster groups for giving parents monetary credit for fund-raising, such as working at bingo night. Before the IRS began to levy fines, the credit parents in some booster clubs received for fund-raising was subtracted from annual fees for extracurricular activities.
Wesley, a counselor and assistant athletic director at Henry Clay, said that parents were so scared by the IRS fines that the booster council couldn't get anyone to serve as officers for this academic year. The group has voted to disband, but is waiting until the IRS rules on its appeal of the fine to officially stop operating.
Of all the fund-raisers for booster clubs — parent groups that raise money to pay for students' sports and extracurricular activities — bingo has traditionally brought in the most money. From 2000 to 2005, the total was $6.8 million.
Since the IRS began fining boosters last year, all of the groups have stopped giving credit to parents for working at bingo parlors and are following the guidelines the IRS is implementing, said Michael Reynolds, an attorney who represents the booster council at Henry Clay and the Bryan Station Baseball Boosters.
'Letting bingo go'
The Bryan Station Baseball Boosters, who are appealing a $61,000 fine, are still participating in bingo, said treasurer Terry Helton. But "we have tossed around the idea of letting bingo go," Helton said.
One reason, Helton said, is the fines. But another issue is the tanking economy, which has caused bingo proceeds for the Bryan Station group to drop.
From 2006 to 2007 — the most recent years for which numbers are available — Fayette County mirrored a statewide decrease in both bingo attendance and handle, which is money taken at the door before payouts or expenses are deducted. Annual reports from the Department of Charitable Gaming attribute the drop to "changes in the economy."
In Fayette County, bingo attendance fell about 5 percent, and the total gross from bingo fell more than 9 percent, from $15.6 million to $14.2 million, according to the Department of Charitable Gaming. Statewide, the gross handle from bingo dropped almost $40 million to $488 million.
The Bryan Station Baseball Boosters are starting to rely more on other kinds of fund-raisers, including selling gift wrap and cookie dough and holding yard sales and car washes, Helton said.
In addition, "We're more actively pursuing sponsorships through businesses," Helton said. "We're more proactive now."
Organizers of other booster groups also say they are increasingly asking businesses to sponsor them.
Brian Kinney, former president of the Lafayette Band Association, which is appealing a $9,000 IRS fine, said that group is still participating in bingo, but, since it hasn't been issuing credits, "it's harder to get parents to help."
Kinney said bingo is still profitable, but the group is waiting for the outcome of the IRS appeal to determine whether it will continue to participate.
Fayette County schools Superintendent Stu Silberman has said he hopes the IRS will eliminate or at least reduce the fines, which he said are a result of new IRS interpretations of long-standing practices in Fayette County.
None of the groups that appealed their fines have received a ruling from the IRS.
The practice of giving parents credit toward their children's extracurricular costs — through bingo and other efforts — had not resulted in penalties until recently. But in a letter to Sen. Mitch McConnell's office earlier this year, IRS Director of Exempt Organizations Lois G. Lerner said the practice of crediting parents for work was against federal law.
"The requirement that each parent/member of the club must participate in the fund-raising activities in direct proportion to the benefits they expect to receive toward their children's expenses directly benefits specific individuals and the parents instead of the class of children as a whole," she wrote.
Lerner's letter said that the IRS does not prohibit booster clubs from conducting fund-raising activities as long as the group as a whole benefits.
In Washington, McConnell, Rep. Ben Chandler and Sen. Jim Bunning all have made inquiries to the IRS about the fines and say they are still working on the issue.
"Congressman Chandler remains concerned that it appears IRS law is being applied inequitably to Central Kentucky booster clubs," Chandler spokeswoman Jennifer Krimm said. "The office is continuing its discussion with the IRS and is raising questions about the fairness of its actions."
Scott Nicewarner, co-president of the Henry Clay Band Boosters, a group that paid a fine of more than $30,000, said losing the ability to give parents credit for their fund-raising "slowed us down some."
The band boosters are separate from the Henry Clay Booster Council.
Nicewarner said that once band booster parents got accustomed to working bingo for the group without receiving credit for their children, participation picked back up.
"We're surviving, and we have no plans to quit it at this time," he said.
Nonetheless, said Nicewarner, "would we like to have something that replaces bingo one day? Absolutely."