It is frustrating to get 2 different answers since we will be accountable if the choice we make is challenged by the IRS. It is good that the agent gives you his/her ID # when you call, so that if we are challenged, we have the source of our action. As has been mentioned on this board, I don't think the IRS is looking to hassle groups such as ours, which are small and only looking to help our students, but I am always wary of the muscle of government. That being said, this particular group (Exempt Organization) of the IRS has been very willing to "talk me through" questions that I have had. Because there are 2 different answers given to some questions I have had, I get the feeling there is room for interpretation, and our small group would not warrant too terribly much scrutiny.
I will post when my application for exempt status finally gets approved (hopefully!!).
Kayla;142311 wrote: I called the IRS again to clarify this issue with "successor" organization and got a different answer this time. This agent said that we could check "No" to Question 1 in Part VII and not fill out Schedule G. Her reasoning was that the previous, "old" PTO never had an organizing document and thus it was not an organization recognized by the IRS, thus we were brand new, not a successor at all in their view. I would then put the $15,000 that we received from the bank account of the old PTO in the Balance Sheet portion of the Section X, Financial Data, not on the Revenue section. I could attach a statement saying where that money came from (an old group that had never formalized). This take on our situation seems more suitable for our small group. I think this is the route I will take.
Thank you for sharing the information! That is roughly what our "volunteer" lawyer had said as well (although I hadn't gotten into all of the details completely with him as of yet!) Certainly is more simplistic.
Scary that you called the same spot and got to different answers though isn't it?
I called the IRS again to clarify this issue with "successor" organization and got a different answer this time. This agent said that we could check "No" to Question 1 in Part VII and not fill out Schedule G. Her reasoning was that the previous, "old" PTO never had an organizing document and thus it was not an organization recognized by the IRS, thus we were brand new, not a successor at all in their view. I would then put the $15,000 that we received from the bank account of the old PTO in the Balance Sheet portion of the Section X, Financial Data, not on the Revenue section. I could attach a statement saying where that money came from (an old group that had never formalized). This take on our situation seems more suitable for our small group. I think this is the route I will take.
I spoke with the IRS on this issue, who referred me to the "Glossary of Terms" page (p. 36) of the current "Instructions for Form 1023" booklet. There it defines "successor" for purposes of answering question #1 of Part VII "Your History". Since we (the newly incorporated PTO) took over more than 25% of the old PTO's assets (we took over 100% of the assets-cash), we WOULD be considered a successor and would need to fill out schedule G. We would then put that cash received from the old PTO on line 1 of Part IX, Financial Data under the "Current Year" column. There does not have to be an explanation attached to this section for where that money came from. (I assume the IRS would see that it came from the old PTO after looking at Schedule G.) Has anyone had a different take on this situation? My worry, of course, is that there will be some back taxes issue for the old PTO, and that would be difficult since there was no good record keeping from prior years. Can anyone who has experienced this dilemma RECENTLY comment? I am certainly going to proceed as the IRS agent advised and let the chips fall where they may, but I am going to be so upset if I have more work to do to solve the past issues of the old PTO!! I am only trying to do what is right, and I am getting frustrated that at every turn, a new legal/tax issue confronts me! Sorry for the venting! I'd love to hear your stories/experiences. Thanks
I think the start-up guide is not correct for your situation. I would be inclined to answer yes. If you do answer "no" then I think you'll find that you have to identify the old PTO anyway as the source of a donation that exceeds a certain percentage of your gross revenue.
BTW: on membership fees, there's some guidance in the IRS pubs that indicates that PTO dues don't count, since you don't get any tangible benefits for the dues.
