Holiday Here is some info on Unrelated Business Income:
IRS Form 990-T
You may be required to pay tax on other types of income, referred to as unrelated business income (UBI)
The law requires nonprofits to:
-Report unrelated business activities when gross receipts are at least $1,000.00 by filing IRS Form 990-T
-Paty taxes on net (after expenses)receipts
For the activity to be considered UBI three factors must be present: The income or activity must be
(1) from a business, (2) regularly carried on, and (3) unrelated to the organization's exempt purpose.
I still don't know what this means: "the IRS does not care how you raise the money if it is unrelated to the intention of your non-profit status." So how does gift wrap sales relate? Or can you give me an example of something that doesn't relate? If gift wrap sales doesn't relate, then just about every PTA and PTO I've ever seen is in trouble.
Tim, I am sure your forum was a success, therefore providing the basic tax laws about raising funds would be equally well received on your web site.
There are no implied accusations in my message. I admit to being frustrated, since no once in my 20 year PTA career have I ever been hateful or disrespectful about a school group that is not a PTA - I have friends that send their children to private schools and they call their group PTF. I have virtual friends that belong to HSA - we all work for the same reason - our kids.
And yes, the IRS does not care how you raise the money if it is unrelated to the intention of your non-profit status and if you are not non-profit aren't you running a business if you are raising funds? Income is income, and when a non-profit only income that is related to the cause for which you were granted non-profit status is non-taxed. Just because you are raising money for a school does not mean the IRS will not look at the income as business related if you have not applied for a non-profit status.
Nor can you use your school's tax status to raise the funds because if they are non-profit they too have to follow the same laws.
Folks, this isn't about being PTA or PTO or PTF or HSA, it is simply about following the rules. Just check into it and be safe, be right. I know you all are working as hard as anyone else, good luck.
"The IRS doesn't care why you raise money, only how you raise it..."
Isn't this untrue? As far as I know the IRS definitely cares why you raise money. That's a big factor in determining whether you get nonprofit status. If I told them we were raising money to help a business or something, then they'd tell me we couldn't be a nonprofit.
Thanks for jumping in. I'm sure your insight will be helpful for folks.
Just to address one quick point: I think PTO Today has a pretty good track record of addressing IRS issues. Example: at our very first PTO Show, we had an IRS agent and a nonprofit lawyer on a panel entitled "The IRS, Tax Law and Your Parent Group." The PTA and PTO members in attendance raved.
We're sure to have similar content and more at our upcoming Shows in New England, Ohio and Illinois ( www.PTOtoday.com/show
).
Your message has so many implied accusations and I really don't like that. I'm glad our group is a PTA but most of the PTOs I know (our town has 3 PTAs and 5 PTOs) do their best to ask about IRS matters and most of them fundraise in exactly the same ways as PTAs do. If they fundraise the same ways, then the only difference is whether or not they are officially 501(c)(3). I agree that they should probably become an official 501(c)(3), but I don't agree that PTOs are doing all kinds of things wrong.
