If your PTO is a separate entity (with its own EIN), then parents donation of money to the PTO does not affect the school's net income.

When our PTO donates money to the school, the check actually gets made out to the town (the school dept. is run by the town), and the School Committee has to vote to accept the donation. Then I assume the school finance director figures how it goes in her accounting.

I recently began attending PTO meetings and asked lots of questions so I could better understand the workings of the group. As answers were vague, it lead me to more questions. One being about who controls the PTO ~ is it its own entity or under the school, like a committee? Information I received was contradictory, such as bylaws state the group is not for profit, one co-president told me the group is tax exempt then stated it uses the schools EIN. I wonder if there is some loop hole, but decided to take the advice of an article I read on this site about determining a group's legal status. I called the IRS. The gentleman I spoke with was very helpful.

Here's what I was told:
1) A PTO need its own EIN which is easy to apply for.
~ using the school's EIN is not legal. If used to open a bank account the account actually belongs to the school.
~ If a PTO is not recognized as a public charity, then fundraisers/donations are not tax deductible (It can not be claimed on a person's tax return.)

2) A PTO should file for federal tax exempt status, known as 501(c)(3) in order to be exempt from federal income tax.
~ If a PTO, considered a public charity, makes more than $5000 it must file a tax return. Even with tax exempt status, a filing form is required (form 99 or 99N)

I would strongly recommend, calling the IRS with your questions. I found them to be very helpful. The IRS Tax Exempt Organizations Unit can be reached at 877-829-5500

*Oops, only after I responded did I notice additional pages of replies, which do refer to what the IRS told me.

After reading the responses of GJCoram and JHB, I would like to know how does donating money affect the schools net income when they report to the IRS?

This is digressing from the original question a bit, but in my mind, there are 5 options for parent groups:

1) Operate simply as a committee of the school that handles volunteer recruitment, communications, assists with fundraisers, but has no bank account/independent presence. Needs a good relationship with school administration and upfront agreements as to duties and how funds will be used that PTO helps raise.

2) Have a very small independent organization (EIN, bank account) but keep under the $5000 gross receipts amount. (Total - from all money flowing into your accounts during the year is less than $5000). If you work on bigger events, have funds go directly to school. You don't need to file the 501(c)(3), but you do need to file the annual "postcard" 990-N return and run your organization according to non-profit standards.

3) Set the organization up properly as a tax-exempt charity, filing the the application for 501(c)(3) status.

4) Become a chapter of larger umbrella organization, gaining your tax exempt status (and processes/best practices) from them.

5) Operate as an illegal organization with more than $5000 receipts per year but not following the federal/state rules.

The above is simplistic, but represents the common choices. Obviously #5 is what we are hoping everyone moves away from.

> What we actually did was donate the money to the school district
> and they in turn purchased the equipment.

This is an excellent way to do things -- we are 501(c)(3) , but we still do this for large purchases, so that the district owns the equipment for warranty or insurance purposes.


> I'm afraid that we wouldn't be able to recoup the money in the time
> before the TID would expire.

It's a $750 (or so) fee to apply for 501(c)(3) status, but once you get it, it never expires. (It can be revoked, if you fail to file the tax returns.)

I'm in Texas too and we definitely can not use the school tax ID number. We do have our own EIN though as a non-profit. I'm VP of Ways and Means so I need to be aware of that stuff when looking for donations, etc.

I would suggest you check with your school district. Our ISD has a huge section on money, the school, Parent organizations, and the IRS. It's all posted online as the Parent Organization Manual. Seriously, it's 254 pages and there is an annual meeting right before school starts to review it. Our ISD is a little micro-management oriented though.

You could always check with a tax attorney as well. Some do pro-bono work or if there is a law school nearby you can see if they have free help available there. Or even see if there is a Small Business Association that has "clinics" and sessions that might provide you with sound legal advice.

The last thing any of y'all need (school, district, PTO, etc) is to get in trouble with the IRS.

I've been reading this topic with increasing fear and relief at the same time! I have been the treasurer for our PTO since 2009 and have asked about the Tax ID for us several times. I have been told that we didn't need one and that previous years haev always used the schools id. Up until this past May, I had not asked to use the school's TID, but since we were purchasing a large peice of equipment and coudl several thousand dollars, we did it. What we actually did was donate the money to the school district and they in turn purchased the equipment.

We have looked into getting a TID for the PTO, but it's a $750 fee to apply. We are a poor school district in Oklahoma and cannot afford that amount easily. I'm afraid that we wouldn't be able to recoup the money in the time before the TID would expire.

Does anyone have any advice for us? We recently redid our bylaws (which were lost by a previous president a few years back) so if we go ahead with this, we are prepared with bylaws. We have an energetic group this year and I woudl liek to leave on a good note this year with several issues cleared up before my "retirement." (I've been in the same position since I was voted in and my son is moving on to the middle school next year.)