I just posted to a similar question on the Robert Rules Board - so if this looks familiar to someone you know why;)
But first, we were in the same situation - the City Treasurer told us to stop using the City Tax Exempt number and we started from scratch with an EIN. We posted a presentation on our experience to help other PTOs go down the path. You can see it at:
www.macarthurschool.com/pto.htm
and click on the "Guide to Getting Non-Profit/Tax-Exempt for a PTO" link on the right hand side.
But to answer your questions about advantages and disadvantages, I see 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). It is also true that many businesses - especially large ones - will not donate unless you are 501c3.
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.