if your PTO does not have an Article of Organization, that IRS and the State do not recognize you as a non-profit organization period.

I don't believe that's quite right. The IRS regs require an "organizing document" which defines WHO and WHAT you are. If you are incorporated, you would typically have Articles of Incorporation. If not, your document might be called Articles of Organization, Charter, Constitution, or maybe even something else.

The bylaws, which define your internal rules of operation, is the other important document.

When we incorporated several years ago, we had a constitution plus our bylaws and the IRS required the two different documents. It's becoming more common now to have a hybrid document that people still call "bylaws" but has both parts. The IRS will also accept that:

Bylaws may be considered an organizing document only if they are properly structured (includes name, purpose, signatures, and intent to form an organization).

You do need to have an organizing document, but there are several different ones that might apply.

JHB;142218 wrote: The sales tax issue is based state regs. Being 501(3)(3) doesn't automatically give you sales tax exemption in your state. You have to see what your state rules are. They may very well have tied it to that as a prerequisite, but there may also be an application process. It also may not give you a complete pass on sales tax. For instance, here in Texas you need to apply for sales tax exemption (which is easy if a 501c3) and it grants you exemption from sales tax on qualified purchases and on TWO fundraisers per year.

In Florida, our EIN#, a short simple application is all we need to be tax exempt on purchases. Until my intense reasearch we did not even know this for 2 yrs! Think of all the money we could have been saving. One thing I've realized that no one brings up is--if your PTO does not have an Article of Organization, that IRS and the State do not recognize you as a non-profit organization period. We did not have one for 2 yrs. So, our deadline on the 501c3 begins when we do our Articles of Organization signed and dated by our officers.-Not when we formed. The state also requires the we register our PTO which is simple and free, but have to have Articles of Organization to be "officailly" considered a non-profit organization. I think PTOtoday.com should stress this more in the start up tool kit and other step by steps. It is only mentioned as part of the incorporation process which not everyone does.

LaAng3;142211 wrote: ....Can anyone give me advise on how to deal with members who refuse to educate themselves and vote based on spending money?

Basically you have to show them the benefits and risks in a compelling manner.

As far as incorporation, that PROTECTS your officers/directors. If you are unincorporated and someone sues the PTO - they can go after the individuals' personnel assets.

On the 501(c)(3) status... first, keep in mind that the IRS seems to have no wish to go on a crusade tracking down rogue PTO groups. So in actuality your risk is probably low. But the facts are:

Any entity that generates income is potentially accountable to the IRS. And the individuals who run an organization can possibly be held responsible not following the law.

The risks of exposure are increasing as finances become more electronically standardized. Banks have red flags such as large deposits of cash. The new e-postcard filing requires all tax-exempt charitable entities to report annually. That may not be what you are technically, but isn't that what your group is proporting to be?


Can you and the others in good conscience be leaders of a group you know to be operating illegally? What risks does that pose? What example does that set for the kids? (We know it's wrong, but we we don't want to fix it because it's too hard ??)

I found myself in your shoes twice:

1) Elementary PTO with $20,000-$60,000 gross income per year. I was only just learning all this stuff when my concerns starting surfacing. We suffered an embezzlement, which is a definite incentive to fast-track formalizing. (Not the method I'd recommend, but very effective!)

2) Middle school PTO with $5,000-$10,000 gross income per year. They didn't want to formalize, so we restructured to keep income below $5000, deciding that any fundraisers that would raise our level would be done in the name of the school with us providing volunteers. (And agreeing in advance on terms, purpose, etc.) Note -read the $5000 gross receipts test, it's not exactly a flat $5000.

Another possibility - see if your district or your district auditor has any recommendation or policies a school-affiliated group should be following. Often the instructions of a third party like an auditor or the IRS wake people up.

Good luck.

Leasa;142212 wrote: One financial advantage you might be able to use is no sales tax applies to 501(c)3 organizations. You may not have sales tax in Florida anyway, but for other states, it is certainly an advantage when purchasing supplies for various fundraisers. Good Luck!

The sales tax issue is based state regs. Being 501(3)(3) doesn't automatically give you sales tax exemption in your state. You have to see what your state rules are. They may very well have tied it to that as a prerequisite, but there may also be an application process. It also may not give you a complete pass on sales tax. For instance, here in Texas you need to apply for sales tax exemption (which is easy if a 501c3) and it grants you exemption from sales tax on qualified purchases and on TWO fundraisers per year.

Any lawyers on the board? Or maybe get a lawyer or an accountant from outside to give the presentation about how it's not a question of what you "want" to do, it's the law. Point out that, if you fail to file 990-EZ, you'll be subject to a fine of $20 per day. Then the filing fee will seem small.

Does anyone on this site have a copy of a letter from the IRS saying that they owed the fine? (I've heard that you can get it waived, but no need to elaborate on that at your meeting.)

One financial advantage you might be able to use is no sales tax applies to 501(c)3 organizations. You may not have sales tax in Florida anyway, but for other states, it is certainly an advantage when purchasing supplies for various fundraisers. Good Luck!