Our PTO needed to deal with this. If embarking on this path, be diligent, check with the IRS offices regularly, go in personally if possible.
We had to re-file 3-4 years worth of financial reports and it was a lot of work but it was worth it. Once our tax forms were up to date and we received approval letters from the State and Federal agencies, we needed to reinstate our 501(c)(3) status. We were successful on all accounts and our 501(c)(3) was made retroactive to cover the period in which it had lapsed.
We are now providing the PTO Today checklist to every incoming Treasurer and making sure that new boards know their fiscal responsibility when it comes to filing taxes and maintaining our 501(c)(3) status.
Taking these steps will show the IRS and your Principal that you are serious about being there to support the school and that you take your responsibilities as an organization seriously.
That being said, if the decision is to let the PTA R.I.P., hopefully you can be helpful and involved in other ways.
If you want to continue as a PTO, definitely reapply for 501c3 status. Plan on it taking a long time to get a response. I chair a non-PTO related 501c3 that also had its status revoked due to the change in filing requirements that we were not aware of. When speaking to an IRS agent, they said that we were one of 270,000 charities that had their status revoked. The IRS received our application in January of this year and provided us with a letter that said we should hear something within 90 days. Every time I call they said that our case has not yet been assigned to an agent. We just decided to incur the expense of getting a lawyer involved. Good luck!
First, losing your 501(c)(3) status does not mean the PTO no longer exists. It simply means that it is no longer tax-exempt; you must pay sales taxes on purchases, and donations to the PTO are no longer tax deductible.
Second, generally principals do not have authority to "shut down" a PTO -- but in practical terms, if your principal won't support you, it will very hard for you to do very much.
Your bylaws may say who can see your books, but if there's no prohibition against sharing them with the principal or school, I would do so; refusing to open your books makes you look like you have something to hide. But opening your books, and even letting the school district audit the account, is not the same thing as turning over the money. You should not do that unless you vote to dissolve.
I don't know much about site councils, but generally speaking anybody can fundraise, whether you're a 501(c)(3) or not; there are rules about what you can say in your fundraising materials if you're not tax-exempt, but you can still raise money.
You can also probably get your 501(c)(3) status restored. The IRS is usually pretty forgiving to small organizations that made honest mistakes or omissions, so I encourage you to talk with a tax attorney; you might even have one who's a parent at your school and would help you free or cheaply.
After talking with a tax attorney, you might try sitting down with your principal as a board and try to come to some understanding. You all want the same thing, after all -- to support your students and teachers -- and that's a good place to build from.
Our school PTO 501 was revoked last year (due to not filing taxes in prior years). PTO still operated last year and had events for the school and did some fundraising as well.
This year, the principal has shut down the PTO. The school is now using their Site Council to do the fundraising and organize the events.
Now, the principal is asking for the money from the PTO account. The school says that the district is auditing all the money. They say that the bank account has the school name on it, so they get the money. (It does have the school name on it, followed by PTA) (They were originally a PTA, and the bank account still has PTA on it).
Our bylaws state that upon dissolution, any money will be given to the school. I believe that the PTO also has the option of purchasing something for the school instead.
My questions are:
1. Isn't the PTO it's own entity? In other works, the PTO does not need to show anything to the school or district because they are their own "business"? The school is not privy to PTO financial records? What about the fact that the PTO 501 is revoked? Does that mean they are no longer their own entity?
2. Does anyone know about the legalities of Site Councils? Can they fundraise? They do not have a 501 either...
