I have been visiting this site for the past three months and I love it! Everyone that has participated in the discussion forum has helped me out a lot. I have learned more here then I have from any of the past members from my PTO group. I am a new president and learning fast. I just wanted to thank-you in advance....

Now, I have a problem and need some advice. We became a PTO in 1992. Some paper work fell through the cracks when officers changed. The officers of 1993 did not fill out the Annual Registration Report (Not For-Profit Corporations). In our secretary's folder I found a letter from the Office of Secretary of State requesting in 1995 that these froms be filled out. If the forms were not filled out then we would be disolved (not be a corporation). When I first became President this year I had been looking for somthing that a past President told me. I ran across these papers and had no clue what they were.

During all of our changes of officers we had also lost our tax id # (It had not been keep updated). Some how last year some one used our tax #. When the school year started and I went to clean out the PTO box there was a "1999 Return for Private Foundations or Section 4947(a)(1) Nonexempt Charitable Trusts Treated as Private Foundations". I had no idea what this was eather. I asked the previous President and her comment was "Oh-my gosh. The treasurer had used the tax #. Its not any good." She told me to check with our attorney on what to do. Needless to say, durring this time our Carnival was going on, and I had my hands full (little help was comming from past president/I had never been very active with PTO before this year. Always been a very cliqish group. Past President had told me if I took office she would walk me through Carnival/she didn't).

From checking out this site someone asked if they needed to file a 990. That reminded me that I had never gone to the attorny and checked out what I was suppose to. Anyway, this last week I have been to see a representative of our lawyer. She told me that the organization had been disolved in 1993. That I needed to talk with another person in the office who could give me more info on what to do about the 990 and getting us back incorporated. I do this Monday.

I talked to a past president about this who is on our "Playground Committee" (yes we are trying to purchase much needed equipment). She told me that she didn't think it was no big deal. That the "Booster Clubs" at the school are not a corporation and they do all kinds of fund-raising. And the reason we became a PTO was to get rid of paying out money (dues).

Now, my questions;

What does the 501(c)(3) do? Why do PTO's need it? OR do they? IF PTO needs this why not a Booster Club? Has anyone else been through this? And is this "NO Big Deal?"

Sorry for such a long post. I know I may find some of these answers Monday. I just have a hard time waiting.

Thanks again....

[This message has been edited by Krippe (edited 02-09-2001).]

You may also want to use the search facility on this site using key words like "501" and "non-profit". There are extensive postings from the past that would be helpful to you. By the way, I think it's great you are making the effort to get professional advice (and perhaps you can come back and share some of that). Many of us on the forum don't have lawyers or CPA's and muddle through just with each other's help, so it's always good to hear what the professionals have to say.

The primary advantages of becoming a 501(c)(3) are additional credibility, the fact that contributions to your organization are tax deductible for donors, and some other perks such as the eligibility to use non-profit postage rates. These groups file an informational return with the IRS called a 990EZ or 990 if they earn more than $25,000 per year.

Theoretically, every person or entity that produces income should be filing something with the IRS (subject to exemptions, income thresholds, etc.) What we need is for somebody to get the answers from a professional and share it with us regarding situations like yours. We know there are tens of thousands of groups operating informally and filing nothing. Is there a general exemption based on some criteria? If not, what happens if you get caught? If they aren't going after non-profit status, what SHOULD clubs/groups be filing? A business return?

We know it's "good" to be a 501(c)(3) and that they file a Form 990, but I too am curious about what the rules are for the informal groups that exist. I've never seen that answered head on in the year I've been participating in this forum. If somebody has access to a lawyer/CPA and can post some answers (maybe you, after your meeting), I think it would be great to see it in print once and for all.

Anyway, if you DO go for the 501(c)(3) there's lots of help available from those of us on the Forums. Good luck!

[This message has been edited by JHB (edited 02-10-2001).]

JHB-

Your suggestions are always as subtle as subtle as a sledgehammer!

I agree that this is a great issue to delve into more deeply. We'll see what we can do in a future issue. In the meantime, all the feedback from you folks doing the independent "investigatin'" is a great start.

Tim

Okay, despite (or maybe because of) Tim's teasing, I did some more do-it-yourself investigating and had a nice long chat with a rep from IRS Exempt Organization customer service (amazingly helpful people!).

Assuming you are NOT an 501 exempt org, here's how it supposedly works:

Any org like we are describing should be filing a tax return if they have more than $5000 gross receipts per year. (Example: if you just have one sale which make $8000, pay catalog company $5000 and keep $3000, you are supposed to file. Gross receipts were $8000.)

If they aren't a 501, then they are a business and need to file a Form 1120 Corporate Tax Return. (Now maybe you have income and then expenses and then everything you gave to the school is a deduction and nothing's left or maybe there is something left over when you do the math. Whatever.) Anyway, just like personal taxes, whatever amount ends up on the taxable income line at the bottom of the form is what tax due is calculated on.

If you have income, don't file, and get caught, then the officers at the time the income was earned are liable. Even if there wouldn't have been any income tax due (had it been figured and filed properly), you could still get into penalties and fraud charges.

In a nutshell, those are the RULES. However, the IRS isn't likely to go on a massive witch hunt to track down rogue booster clubs and PTO's. So maybe the risk for some doesn't seem large enough to go through the hassel of filing.

Note though, some things might increase your risk. If you are a PTO grossing large amounts - that might attract attention. If you have an angry constituent, they may call and turn you in. If you got into some sort of scrape, say a lawsuit or maybe you ran raffle or bingo game and that turned out not to be legal, then one thing could lead to another...and on top of everything else, you have IRS problems.

I'd still like to hear from someone who's consulted a tax professional and back from Krippe after the visit to the lawyer on Monday. Again, good luck!

P.S. And remember, if the org is NOT a 501, then generally donations are not deductible for the donor. If supporters think it IS, they may claim them and later have the deductions on their personal taxes disallowed if audited. (Somr grey area, because if given to the school - not the PTO- maybe it was okay).


[This message has been edited by JHB (edited 02-09-2001).]

One advantage that I have found in being a 501(c)3 is with grants. Our PTA has received 5 big grants in the past couple of years for vaious projects( handicap playground, and covered play structure-very expensive) that we have done. All of these foundations required a copy of our 501(c)3 status to receive funds. We have always been a 501(c)3. I would not want to risk not being one. I am one who likes to play it safe and follow the rules. It is just too risky not to.

When our PTO was established in 1995, the treasurer got a federal tax id number (Form SS-4). Everyone always assumed that meant we were non-profit/tax exempt.

Because of this forum, I have begun to research our PTO's official status. We are not a registered non-profit/tax-exempt organization, a.k.a. 501(c)(3). We have never filed the proper IRS forms. There is one key form we need to complete (Form 1023), we must write "Articles of Association", and pay a $500 filing fee in order to apply for 501c3 status. Call the IRS at 1-800-829-3676 and ask for a copy of Publication 557 (how to file 1023), Form SS-4, Form 1023, and Form 8718. That should be plenty to get you started.

For us, registering for 501c3 status is just the right thing to do. No longer can we plead ignorance -- nor can you if you are reading this post! Our school holds an auction in the fall and next year, our donors will be able to (legally!) claim their donations as tax-deductible to a registered non-profit organization.

Coincidentally and very fortunately, our district's accountants have been asked to help all our PTO's and Booster clubs with their 1023 filing. I keep you updated.

Check out www.irsform1023.com for loads of advice on this issue.

[This message has been edited by Critter (edited 02-13-2001).]