Okay - standard disclaimer - I'm not an accountant, but here's how I understood it. (We're talking about Form 1023, Section III, question 9 - on page 6). The final choices for most PTO's seem to be:
h) receive substantial [financial] support in the form of contributions from publicly supported orgs, governmental units, or from the general public.
i) receive more than 1/3 [financial] support from contributions, membership fees, and activities related to its exempt functions.
j) let IRS choose if answer should be h or i
With us, after talking to the IRS, it was obvious we were "i". We don't receive any funds from the city or the school district. We don't get giant monetary donations from the the general public. Our funds come from our PTO activities like the Fall catalog fundraiser, Spring Fling, and T-Shirt sales.(And the IRS rep told us on the phone to put "i"). "J" would certainly be be a safe way to go if you have any doubts.
Articles of Association are your formal organizing documents. For a PTO this is generally your constitution and bylaws. Note - these are TWO documents. We tend to use short hand and call them "bylaws". They may often be in a single word processing file. But, technically, they are two documents and the IRS is expecting both.
OK - now I'm getting really confused. Some say on the 1023 you fall under I, some say J and the example from JHB on 5-16-02 says H. Sounds like IRS isn't even sure. HELPPPPPPPPP! We are sending in our forms. What are Articles of Association?
BPS, I'm with you. I'd want to get it handled while things are new and you have willing people to work on it.
As far as the private foundation question, I talked to the IRS rep quite a bit about this. He said it would be very unusual for a PTO to be one. Usually, on page 6, question 7 would be "no", and then question 9 would be "i". Unless a PTO had a heck of a lot of investment income (that represented more than 1/3 of its finiancial support), that's what he said was the best choice.
I realize that I have a fear (abnormal/paranoid) of the IRS. We have just elected our first board and the school is set to open in the fall. There are two sides of the concern - I want to file NOW when we have no actual data that can be questioned - only estimated budgets, etc. However, as it does cost $500 and we have about $3000 in the bank, this is a concern to the flip side of the coin so to speak. The other side says wait the 27 months (although the way I read it it's 15 months, but don't want to split hairs). I am NOT trying to put mountains where molehills once stood and will not let this become an argument so early - but I also know that in 15-27 months most of us on the board now won't have kids in this school and I don't think it's fair to leave a legacy of unfinished business - especially IRS business, for someone else to clean up. I would like input (I know - I've met my quota of ?????'s on this topic!) on whether you think it's better to file early or wait?
This is in response to IMovePeople's question regarding private foundations. As a PTO, you would most likely not be one of these. On Form 1023, I was advised by an expert in this area to check box J and let the IRS determine is you are H or I. I think they need several years of information (5 rings a bell) to make this determination. The IRS gives you an advance ruling for 5 years when you get your §501(c)(3) status that you are not a private foundation. Within 90 days of the expiration of this period, you need to file the necessary information to prove this. I have not got to this part yet, put I think the information should easily come right from your past Form 990's. If this is not filed, the IRS will determine you are a private foundation (only because you failed to file the data, not because you really qualify as one). This is not something you want to be, so make sure the data is filed. Hope this helps. I am a CPA, although my expertise in this area has just come in the past year when I realized no PTO's in my district had filed for §501(c)(3) status. I had my Form 1023 reviewed by an expert, and above advice mostly came from her.
