GAPTA - I've reread your post, and I've read it two different ways. Can I clear up my own confusion?
There IS a gross income test for whether or not a federally-registered 501c3 needs to file the IRS's annual "tax" return form, called the 990/990EZ. That test says if your group normally grosses over $25k annually, then you need to file the annual form. Is that the $25k threshhold you're referring to, GAPTA? The form is information about where your money came from and where it went, and it must be filed on time, but there are no taxes due.
I've filed the 990EZ for our PTO twice, which by no means makes me an expert, but I don't think there's any threshhold at all for the amount of money a non-profit can hold. You can carryover $25 or $25,000 or $250,000 with no tax implications.
That said, unrelated business income can be taxable for a non-profit. I understand ubi to be money from sales of merchandise or advertising that has nothing to do to promote your group's exempt purpose. But that's not the case with a cash donation to KAK's group. From what I see on Form990EZ, you enter the $25k in line 1 of part I and it just becomes part of your net assets calucation. The IRS won't tax you on it,no matter how large the number.
And I'm not in complete agreement with Tim's perspective on what the IRS would think of how you spent the money (sorry Tim [img]smile.gif[/img] ). As long as you spend it in accordance with your group's exempt purpose, or donate it to another 501c3, I don't think the IRS cares whether you dump it all in one transaction or spread it over several years. Report the ins/outs on your annual Form 990/990EZ and you'll keep the IRS happy. Who does care...or at least should care? YOUR MEMBERS.
Tim - glad you identified the IRS. Isn't the threshold for a 501c3 non-profit $25,000 for fundraising? So, in essence, they would have to file a tax return already for tax year 2006 even without one more dollar as income. Also, I'm curious, how did this happen - was it a gift from someone's will? No one - individuals or corporations - usually drops that much in a single step for a PTO.
For the most part Serendipity is right. PTOs and nonprofits can certainly carryover funds from one year to the next. In fact, it's a recommended practice in order to ensure that you're not putting out fires (desperate to raise money) each fall.
The IRS wouldn't like it if you raised tons and never spent it. But your situation is especially fine -- you got the money without expecting it. The IRS would much rather you make good, well-planned use of it than have you just blow it all in one big shopping spree (even if for your school). The IRS rules are pretty common-sense on these matters.
Man that is so awesome that you received a $25,000 donation! You can't find the information on carrying over money because it does not exist. You can carry over any amount you want. There is no law that says you must spend your money in a given year. For example...when a group decides to raise funds for a playground or something really expensive it may take them a few years to raise all the funds they need. If they had to spend off the money each year they would never reach their goal and accomplish it.
However, you should discuss future plans for this money as it will affect next years budget in the sense that you should justify your fundraising. If you have nothing slated for all this excess money then people might question what the need for fundraising or some of the fundraising is at that time.
Our school received an unexpected $25,000 donation this year and our principal will use it to purchase some of the items the PTO had identified to purchase. Additionally, our fundraising has gone better than expected this year. So ... we have some "excess cash". Several members of our board need believe we need to spend the money this year, while some want to carry it over for next year. I have been unable to find any information about specific $$ amounts that an organization can carry over from year to year. Any insight is greatly appreciated!
