I sympathize with your plight. The independence of PTO is very much a double edged sword. It has the power to do or NOT do whatever it wants. I know our PTO operated similarly for years, and could very well slip back into that mode after I'm gone. One of the troubles of a volunteer organization...

I came to the presidency following an embezzlement that was a real wakeup call for everyone. So at the time, anyone was willing to agree to anything that provided more protection, more security. Once I realized the true rules, I couldn't in good conscious leave us to operate illegally.

On market day, yes the total incoming amount, not just the commission is what counts.

On convincing the others and re-instating yourself.

1) If your EIN number expired at the Federal level, that's no big deal. It's just filling out a one page form.

2) If, as I suspect, you mean your tax exempt status expired at the state level, you need to look into this. Either 1) you need to pay tax on everything or 2) everytime you use the Board of Ed's, the individual doing that is committing a crime! So, you need to rectify that for sure.

3) As far as the 501(c)(3), basically, I was willing to do all the work - so that was key. Assuming you are too - then really, the buyin you need to get from them is the fee ($150 or $500)and the commitment to file a 990 tax return each year (which is just an informational return - not a big deal)

The benefits are
1) You are operating legally
2) This may be required to get your tax exempt status from the state
3) It adds more credibility to your organization
4) If you decide to go after grants at any point, it may be required
5) Contributions to the PTO are TAX DEDUCTABLE to the donor (that's a biggie).

One powerful piece for us when we discussed a similar issue (charitable bingo) was: Can we really agree to operate illegally knowing that we are supposed to be a role model for our children?

Good luck to you. I hope you stick it out, because they need you. I'll help if I can.

Joy

P.S. Note - I posted another message with all the info we put on our 501(c)(3) application. That might be helpful. I think it's under Roberts Rules & Legal.

JHB, I have been attempting to convince others that we need to do everything you've stated and they don't want to believe me.
Now what do I do?
I'm treasurer of a PTO with gross reciepts in excess of $25k (does Market Day count as commission income only, or would we need to also include total sales????).

Also, our EIN was allowed to expire and someone 'borrowed' the Board of Ed.'s # without their permission.

I'm ready to resign and let them find out the hard way. (we had an officers meeting and they ridiculed me because I'm not an atty.)

I truly admire your moxy, lady. Wish you lived here in my town!
take care & God Bless!

THANKS JHB!....you are truly a fountain of information...I will take this to our board and see what they want to do

When I saw this posting yesterday, my first thought was, "where's JHB? This is definitely her "thing"! And you came thru for us once again!!
Jo

I'm repeating a general explantion I posted once before as it may help some of you with these type of questions. This Forum is rich in resources, and these type of questions have been asked many times. In addition to any answers you receive, you may want to do a key word search (or even just change the toggle on "Starting a New PTO" to show more than the default "last 45 days". My information is based on practical research and "living" the process. I am not an accountant or lawyer.

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Once an organization (e.g., PTO or other club) begins to conduct business, and especially financial activities, it becomes an entity with potential legal and tax obligations at both the state and federal level. Here are the key terms and types of status that we have been discussing.

EIN Number – Regardless of what else you do, your PTO really needs an Employer Identification Number (EIN). This is the business equivalent of a social security number and is not difficult to obtain. You simply a complete a one-page IRS form called an SS-4. There is no fee, there’s nothing complicated about it.

Tax-Exempt – This is a STATE term. Generally a qualified organization files an application with the state to become tax-exempt. Typically, this means that you are exempt from some or all sales tax. (Might also apply to other state taxes like income tax or real estate taxes.) Specifically, when you BUY items for qualified purposes as the PTO, you don’t PAY sales on the purchase. It also means that you may not need to collect/remit sales taxes on things YOU sell. You need to check your state laws – it may not be all or nothing. Example, in Texas, we can have 2 days (i.e., fundraisers) per year that are tax-free. On other fundraisers, we remit sales tax to the state comptroller.

Incorporation - This is a type of business structure (controlled by STATE laws). Based on whatever requirements the state sets an entity may become incorporated, in this case as a non-profit corporation. Doing so makes the organization a legal entity in its own standing and thus reduces individual liability of its leaders. If it’s not incorporated, then the organization is merely a collection of individuals who could face personal responsibility/liability in certain circumstances.

Non-Profit Status [especially 501(c)(3)]. This is a FEDERAL term. You complete IRS Form 1023, pay a $150 or $500 fee (depending on gross proceeds), provide designated documentation (Articles of Incorporation or Constitution/Bylaws, budget, narrative about purpose), and agree to terms (like limitations on political activity). Once gaining this status, the PTO is exempt from most federal corporate income tax, has more credibility as a non-profit, and is eligible for certain benefits like non-profit postal rates. One of the most important benefits to many PTOs is that donations to the PTO are tax deductible as a charitable contribution (for the giver). Additionally, this status may make it much easier (or even be required) for receiving grants. At least some states require an organization to have its 501(c)(3) status before they will give it a tax exemption at the state level.

A 501(c)(3) with more than $25,000 gross proceeds files an informational tax return each year – either the 990 or 990EZ. The Form 1023 isn’t simple, but many of us have waded through it without professional assistance.

Note, if you are an independent entity and not formally listed as a non-profit (501c3 or other 501 category) and you have gross proceeds of $5000 or more each year, you are a BUSINESS as far as the IRS is concerned as should be filing an annual corporate tax return.


These seem to be the rules and facts. However, practicalities of life also must be considered. Each PTO needs to weigh the rules, risks, costs, time, effort, etc. and decide how to proceed.

Key sources of assistance and reference:

Your state web site ( www.state.xx.us ) - replace the “xx” with your state abbreviation

IRS forms and publications: www.irs.gov

IRS Exempt Organization customer service toll-free line 1-877-829-5500.
Their hours are 8:00am - 9:30pm EST Monday-Friday. (Incredibly helpful!!)
www.ptotoday.com/nonprofit.html - a list of resources to which many of us have contributed to on PTO Today

[This message has been edited by JHB (edited 08-09-2001).]

HELP! We voted last year to leave the PTA and become a Booster Club, which I am very happy about. The main question I have is: Do we have to file Tax Exempt Status forms with the IRS or any other kind of paperwork? I called them and found out it would cost us $500 just to apply for Tax exempt status, but I'm not sure if this is mandatory. Also, what about an Employer ID Number? Is this necessary also?