I'm on the Cape. We are leaning towards applying for 501c3. It does look for daunting!!! After I saw it was 35 pages long I thought I don't have the time for this and we want to get it done ASAP so we can try to get donations in the spring. Don't we have to go back a few years worth of records to get the information? The records weren't kept very good and they had been operating as tax exempt using the schools 501c3 status so I'm afraid that I would do something wrong and would totally mess it up.
Its really just been one person each year deciding what the PTO will spend money on, running fundraisers/etc. We (3 of us) decided we wanted to be legal so we incorporated in MA, will file for status as public charity this week and the only thing left is the IRS stuff.
Any help would be great, but I'm not sure I would still want to be responsible for it, I would probably do something wrong and delay it!!!
By the way Beryl blew right past us, not more than a few drops of rain. We went to the beach today and it was nothing!!!
Where in MA are you? We are in Waltham. Your budget is also similar to ours.
We were told by our City Treasurer that were were not allowed to use the City's tax exempt number on our bank account (we got a cease and desist letter - however the phrase is spelled). That is what started us down the path to getting 501c3 (and MA Public Charity).
If you are an independent organization from the school (and you are with your own EIN for the bank account), it is probably not legal to use the school's/city's tax exempt number.
I would recommend doing applying for 501c3, but other than the application fee to the IRS, I wouldn't pay someone else to do it for you. You should be able to fill out the application on your own. It is not as hard as it looks (and it does look daunting!) If you need help, let me know and I can assist you (did the same thing for one of the other PTOs in town).
Thanks for the info. The PTO has been operating for the last 8 or so years. They have an EIN number so they have their own checking account. But they were raising funds using the schools or towns tax exempt number. We have incorporated in the state of MA and are applying for status as a public chairty. We will have control over the money ourselves, not the school. But if we want to seek donations for food/raffle items/cash donations can we still do that using the schools tax exempt number so businesses can write it off? Or do we need our own? We know the application is long, I've got a copy. we would hire someone to do it and realize the fee along with account fee would be around $1500. We have the money now. do you think it would be smarter to get a tax exempt number now? Last year the gross receipts were over $25,000. It looks like for the last 7 years they have started each year with at least $12,000 so they have been bringing in alot of money each year.
Sorry for all the questions but we want to make sure its smart to spend the money for the IRS tax exemption.
Critter is right - for a group just starting up it makes snese to be an extension of the school if the school/disctrict is willing to operate that way. Probably the money amounts will be small, but as you grow so will the bank account and the more temptations that come with that.
Assuming you start up as a subsidiary of the school, eventually you need to decide when it is appropriate to go out on you own.
Once you decide to go out on your own (by then you will have a Charter, or something that defines how the group will work, right?!) and create your own bank account, you need to deciude whether or not to go for 501c3 non Profit status.
As I see it, the main advantages of being a Non-Profit are:
1. Your group will not have to pay Federal (and in most cases State) income taxes on the funds you raise
2. People/businesses who donate items to you will be able to claim a valid deduction on their income tax forms (to the extent allowed by law).
3. Your group will generally be exempt from State Sales Tax on items purchased.
Each State is different so the laws (and benefits of Non-Profit) may vary.
In my view, the disadvantages of Non-Profit are:
1. The application - it is a daunting amount of reading and paperwork if you are starting from scratch. In reality, the hard part is creating a Charter (IRS calls it Articles of Organization) that you really shoudl do anyway and the application itself is not so bad once you start (but it does take some time). In addition, you don't really have to start from scratch - there are lots of folks who post here at PTO Today who would like to help you.
2. The application fee. Some groups find this tough to do. If it really a hardship, you are probably not ready for it. But if you take the long view, you will probably save more inthe long run - on sales tax, and income tax that you are supposed to pay, etc.
3. Your group really needs to be mature enough to be able to take on the responsibility of being a Non-Profit. Your will need to keep careful records. You will need to fill out appropriate paperwork for the IORS (and the State) each year. It needs to be treated more like a small business and not so much as neighbors gettijng topgether socially once a month.
On the whole I think it is worth doing for most PTOs.
If your parent group is an extension of the school, and operates under the school's authority, then it's appropriate to use the school's tax id # -- with permission of the principal and probably the superintendent or BOE. Raising money under the school's tax id, and saving it in a bank account opened using the school's tax id, makes the money legally the school's. As long as you have a good relationship with your principal, you probably have some control over the PTO money. For a PTO just starting up, this model makes sense, and for some long-standing PTO's, this model makes sense. Just go into the arrangement understanding the issues, and don't use the school's id number on the sly.
Eventually, your PTO may evolve to the point where the members want more autonomy (or even that the school doesn't want to be responsible for your group anymore). At that time (months? years?), you should look at setting up your own 501c3.
We don't have our Tax Exemption number, we are just starting up. Can we use the schools Tax exempt number? What is the advantage of having our own over using the schools? We are wondering if its worth spending the $750 fee from the IRS.
