Question: Need help splitting in WA State

We currently have a PTA that serves two schools, PK-1 & 2-5. Last night it was voted that the 2-5 will keep the status with the PTA, 501c3, etc and that the PK-1 will split into it's own parent group. There is a strong desire for the new group to be a PTO but the PTA regional rep there is saying that while the money in our current account can be split 50/50 (luckily we have equal students) once our non-profit status is established (state level) that none of the money can be used to obtain our 501c3. While I find this ridiculous on so many levels, it is a scare tactic that is working and I am in need of ideas on how to combat this. The WA State PTA bylaws do say that if a local charter does not remain in good standing with the PTA they are subject to withdrawal and surrender of records & assets. But they also say that if a local unit dissolves on it's own accord that the assets are to be distributed as per 501c3 (to one or more exempt purposes as defined in the code). As our PTA isn't dissolving at all & this is really just a new start up I don't see how the State PTA can say our funds can't be split according to 501c3. Any ideas & help are appreciated!

Asked by twoedmunds

Answers:

Advice from PTO Today

Rockne writes:
Hi twoedmunds - You're right in asking. The state PTA rep isn't the arbiter of nonprofit law. State or federal law is. I'm not an accountant or lawyer, But I'm fairly certain it's OK for a newly formed 501c3 to reimburse start-up costs. So one possibility might be to put the split in place, get the 501c3 status using funds raised or donations to the new organization (or an individual fronting the dollars to pay the one-time 501c3 application fee). Then -- after the 50% of dollars are sent over to your new non-profit, the new non-profit could reimburse the start-up costs to the individuals. If you keep a clear paper trail on that stuff, I believe that's a fine work-around. Another possibility is -- instead of original org sending you 50% of dollars -- they could spend the equivalent amount directly on services/expenses that are for the younger school (field trips, buses, teacher support, arts programs, etc.). So there would never be a transfer to your group. I believe that would be OK, too. Certianly good to confer with your state PTA rep, but -- again -- he or she is 1) advisory, not the boss; and 2) also typically not a lawyer or accountant either. Good luck. Tim

Community Advice

twoedmunds writes:
Thanks so much, I hadn't thought a about reimbursement, that might be the perfect work around. Our current PTA refuses to pay for field trips/transportation in any way & we've got a decent amount since it includes a well built reserve fund. This vote was forced before we had committed to even moving forward, parents were not well informed, & then here was this person & our PTA presenting what is "legal" from a position of perceived authority. So frustrating!

Community Advice

mum24kids writes:
The key here is that you are not dissolving the current PTA; you just have a bunch of members leaving it. The members get to vote on how to spend THEIR money, not any state PTA rep. They way you become "not in good standing" is to not pay your membership dues, not send in your audit or tax return, not keep your bylaws up to date--stuff like that. So make sure the continuing PTA keeps up on what it is supposed to do, and the state won't have any room to complain. As long as you spend your money on what your purpose is as stated in your bylaws, and your membership votes on how to spend the money, you have done nothing that anyone can argue against. So when you figure out how much money you have to split, have a membership vote. Vote to spend $x on the new PTO, which should have a very similar purpose and mission to what the current PTA has. Then write them a check. It does not matter whether they have their 501(c)(3) status or not (and that's a Federal thing, not a state thing, by the way). It is not against any PTA rule to write a check to a for profit company. (If it was, none of us would be writing checks to fundraising companies!) You just have to spend the money on your stated purposed and mission. The only time it's required for you to write a check to another 501(c)(3) is if you dissolve. If it makes people feel better, then make the vote such that you don't disburse the funds until the new PTO gets its 501(c)(3) status. But really--that's not what makes the difference--it is the purpose of the funding. The American Heart Association is a 501(c)(3), but you can't just give your money to them, because your purpose as a school group is not to fund heart research. And I'm not a lawyer, either, but I have started a PTO before and transferred money from an existing PTA to it. As a matter of fact, several PTAs also donated money to us to get it started, because as a new school, it is a tradition to give "seed money" to start up parent groups.