Thanks for the insight, everyone. I know I am irrationally fearful about handling our own finances, but it's such a giant step.
I think the district would like to have us keep our money within their accounts, not because they plan to claim it, but because it makes the bottom line look better. With budget deficits year after year, even our $20,000 pushes things up closer to the black.
This debate started when the finance director said our PSG would no longer be reimbursed for sales tax and bottle deposits when we turn in receipts for payment. After some research on both of our parts, he agreed that the parent group may choose to okay those reimbursements if they wish.
I have to say once again Critter had the right response! Let me add From experience when our group was started there was money marked for playground equipement in a district account, when a budget freeze took place we could have lost that money because of where it was at...their account. It never came down to that but could have. I also have been told that in New York it is not leagal for a PTO to be using a school's id number if they want to be a seperate entity, which also comes down to who "controls" the money.
"When you stop learning you stop growing."
If your group's funds are in a district bank account, you are, in essence using the District's TIN. Or more precisely, they're letting you borrow their money for your group's purposes. If the money is held in a district account, your group is a subcommittee of the school essentially. That means the school/district could conceivably claim your funds. That would be poor PR, but you have no real ownership of the money other than a gentleman's agreement to let your group manage it. If the group is operating raffles without proper licensing, and the finances are flowing into a district account, it seems to me the district is at risk, not your informal parent group (but I'm not a lawyer though I do live in Michigan).
If the district wants the clubs to separate and become independent - or your group decides to do it on your own (i.e. get their own TINs), then you would also set up your own bank account and move all your money there. You can't have it both ways.
As an independent non-profit, there are benefits and responsibilities which might ultimately lead your group to file for 501c3. But the IRS isn't on a witch hunt for unregistered non-profit parent groups and they give you a grace period, plus a gross earnings threshhold that affect your responsibiltiy to apply for 501c3.
Your next step probably is to find out if the district expects your group to break off, and why. As far as your raffle licensing issue goes, call the state licensing board directly. Speak to a supervisor and explain exactly what you want to do. We found that we didn't need a bingo license to do the kind of event we had planned, even though the official application suggeseted we did need a license. Bingo isn't the same as a raffle, but you should do a little research on the phone just to cover all the angles.
Itis definitely not an issue of not an issue of abusing the system. We have always had a great relationship with our district administrators and they have always supported our efforts. And we have rarely even used the tax ID number - only for our holiday shop and to buy the occasional supplies at the local hardware store.
Our finance director said it is simply a legal issue, that a school tax expert has advised the following (this is a direct copy from his e-mail to me):
"Finally, he reminded us that any group that is not a legal entity of the school district must have its own tax ID number. In other words, Boosters, PSGs, etc. must apply for their own tax ID numbers - The school district cannot legally let these groups use our tax ID."
Why would the BOE not 'allow' you to use the TIN. As a service branch of the school, it should be common practice. Are there trust issues? Perhaps the privilege has been abused. Without the TIN, your group must be paying sales tax, which nibbles away at your general funds.
It's a huge problem if you're not following licensing laws. And it's the BOE, not your parent group, who will be subject to legal consequences.
If you get your own TIN without 501c3 status then what are the tax implications. That's a whole new can of worms!
gototop gave excellent advice. Find out first why the BOE has issues and see what can be done to fix the problem from the inside.
Some people come into our lives and quickly go. Some stay for awhile and leave footprints on our hearts. And we are never, ever the same."
"The ultimate aim of karate lies not in victory or defeat but in the true perfection of one's character."
