Is it true each year you have to reapply for 501(c)(3) status and pay the $500.00 fee again each year? Thanks in advance for responses!

I don't believe that is true. Each year you do have to file with the IRS if you make over a certain amount. I'll let someone who is better versed with tax stuff give you a definitive answer however.

Jo

I am not an accountant or versed in tax stuff, as Jo mentioned, but here is my experience. The initial ruling granting an organization 501 (c)(3) is good for five years. This five year period is called an "Advance Ruling Period." At the end of the five years you will have to fill out a form (the IRS should contact you and send you the form) with information that you qualify as a publicly supported organization. It is also my understanding that this will be a final ruling. However, we do not average more than $25,000 income in a year and therefore have not filed a 990. I feel at some point they will contact us again to prove that we still qualify. Maybe someone has had experience with that?

You only have to apply once and pay the $500.00 once. I am just going through the process now, but I understand the 5 year period to be a determination between a private foundation and a publicly supported organization. Both of these are §501(c)(3) organizations, but the private foundation has to pay tax on its investment income. I would not expect that a PTO would end up meeting the requirements of a private foundation.
As far as the annual filing of a Form 990, I have read in many places and I agree that you should file the Form 990 (or 990EZ) annually even if you are under $25,000. The reasons for this are: 1) the 3 year statute for the IRS to audit a return only applies if you file a return. By filing the annual return, you can at least limit the time the IRS could audit you to 3 years; 2) Once you apply for an employer ID number and then don't use it for a long time, it could disappear out of the IRS system or be assigned to someone else. Filing annually will prevent this; 3) Filing every year gives the PTO "practice" in this process and hopefully ensures that someone is looking at it each year. Otherwise, it could easily fall off the radar screen, and before you know it you are over $25,000 and no one notices or knows the rules.

There are probably other reasons to file annually, but these were the first ones that I recalled from my research.

Many thanks for your responses. We were hesitant to apply thinking each year we would have a $500.00 fee. This takes care of that!

BPS,
Good points! Thank you for the info.