The terms are sometimes confusing. You can be tax exempt at your state level, which means you are exempt from collecting/paying some or all state and local sales taxes.
One thing you need to remember is that the PTO is a business - ideally a non-profit organization - but still a type of business.
Some people also use the term "exempt" to mean gaining non-profit status at the Federal (IRS) level. To do this you need to become a 501(c)(3) to operate legitimately as a recognized charitable organization. Once gaining this status, the PTO is exempt from most federal corporate income tax, has more credibility as a non-profit, and is eligible for certain benefits like non-profit postal rates. One of the most important benefits is that donations to the PTO are tax deductible as a charitable contribution (for the giver).
Additionally, this status may make it much easier (or even be required) for receiving grants. At least some states require an organization to have its 501(c)(3) status before they will give it a tax exemption at the state level.
I've been told that if you don't become a 501(c)(3), then technically, your PTO is just another business and should be filing a commercial tax return. Of course, what most often happens is that organizations do nothing, file nothing.
So if your org is already "exempt" - either it's only for sales tax (i.e. at the state level) or you ARE a 501(c)(3).
The "letter of determination" is the official paperwork that proves the IRS recognizes you as a 501(c)(3) public "charity." There's another form you have to file at the same time (723?) as the 1023. The team you volunteer for probably has some sort of rule about donating only to 501(c)(3)s--not only are donations to you tax deductible, but it also gives assurances that you are a bona fide charity doing good work. This is why we bit the financial bullet and applied, and are awaiting our OK right now :eek: !
A "determination letter" is typically the letter from the IRS verifying your tax-exempt status as a non-profit. So it sounds like they are asking you to produce your letter (meaning you've already finalized your 501(c)3) or else start that process.
The process involves some dedicated time and effort filling out the application form (called Form 1023) and paying a fee - usually $500.
There's lots of help available here on this Forum and if you do a search, you'll find numerous old threads discussing the process.
Joining NPN may be another avenue for you. As a member, you'll receive a guidebook that helps you through the process. Good luck!
We have been volunteering at our local professional football games to raise money. They now want us to become a 501(c)3 in order to participate unless we give them a letter of determination. Does anyone know what this is? They really didn't even seem to know. We are a private catholic school and definitely a not for profit. We really don't want to go down this route unless we HAVE to.
