Question: School Wants PTO Fundraiser Money for Tax Purposes.

Our PTO held a fall fundraiser (Race For Education) and raised a generous $29,000. Because the PTO does not have tax-exempt status, the donation checks were to be written to the school. The "Race" forms stated that donations would be tax-deductible. The PTO deposited the fundraiser checks into the PTO account (with permission from the school), because our school did not want to deal with the large volume of checks coming in. Now that we are nearing tax season, our school says that the PTO needs to write the school a check for the full fundraiser amount, so that the school has a record of the money (for tax purposes?). This makes sense, since the checks were written to the school. We were then expecting the school to write a check back to the PTO (less the 20% that goes to the creator of the "Race" fundraiser). However, our school says that the money needs to stay in the school account until this money reaches a zero balance. Is this on the "up-and-up"? It seems to the PTO officers that as long as the school can provide a record of proof that the fundraiser money resided in their account, this should be all that is necessary in case of an audit. I can't help but wonder if the school wants the money to sit in their account so they can accrue the interest on the money. Also, if the PTO does this - the school says that we will have to write purchase orders to access the PTO money. The PTO officers are confused and frustrated. Any help in addressing this matter would be most appreciated. Is there any IRS (or other) literature stating the amount of time that charitable money must reside in an account for tax purposes? The PTO would like to arm ourselves with some knowledge before we meet with the school's financial manager. Thanks so much for any help or suggestions. -NL

Asked by nlangland

Answers:

Advice from PTO Today

Craig writes:
First of all, let me qualify this answer by saying I'm not an accountant or tax attorney. But I can understand why the school feels the way they do. The complicating issue here is that you told people that their donations would be tax deductible. That means the donations under IRS rules must be made to a registered 501c3 charity, which the school is and the PTO isn't. If the school then turns around and gives the money to you, it could be interpreted by the IRS as trying to subvert the tax code. (Again, this isn't legal advice, just my observation.) In general, money issues between the school and PTO are much less complicated when a group has a 501c3 tax-exemption. I'd strongly recommend that your group start the process of obtaining 501c3 status. It is time-consuming, but it's not as difficult as you might think.