PTO Today

Hi. Zeroing in on finishing off our application and hit a wall with this question. I'm pretty sure we are not a "private foundation" and that we would be an organization supporting a school. That requires us to pass at least one of 3 tests, of which "operated in connection with" seems to be the most likely. However, much less than 85% of our funds go directly to the supported organization. With the exception of supplies bought by us for classroom and playground use, as well as books for the library, most goes towards activities that enhance the school but are peripheral to it. How do we know if we have passed this test or not? I hope this makes sense - my head is swimming in IRS jargon.
Thanks,
Tim

I think you are referring to Section X, Question 5. Correct? If so it's easier than you think.

Don't put "d. an organization supporting..." While PTO's do provide supplemental support to schools, that's not what the IRS means. That typically refers to much more substantative involvement, such as underwriting the costs so the supported organization can exist. More than the extras the normal PTO provides.

I think most of us put "h". But we've seen g, h, or i all selected with success.

g) 509(a)(1) and 170(b)(1)(A)(vi)—an organization that receives a substantial part of its financial support in the form of contributions from publicly supported organizations, from a governmental unit, or from the general public.

h) 509(a)(2)—an organization that normally receives not more than one-third of its financial support from gross [B]investment income [/B]and receives more than one-third of its financial support from contributions, membership fees, and gross receipts from activities related to its exempt functions (subject to certain exceptions).

i) A publicly supported organization, but unsure if it is described in 5g or 5h. The organization would like the IRS to decide the correct status.

JHB is right. You can pick i, but then I think you have to fill out two sets of numbers to help the IRS determine which one you are. Probably h is right -- and then you do have to fill out the "public support test" -- on Form 1023 and on your tax return each year. The nuisance here is you're supposed to track donations by your officers and other "disqualified persons" (anyone who gives more than 1% of your total revenue in a year), but most PTOs don't track how much giftwrap the officers buy (as an example).

I asked my officers to estimate their donations and noted on the form that it was an estimate, and our application was approved. The public support ends up being > 90%, so they're probably not really interested in the exact details.

The problem comes in when four people decide to make a charity, donate $50k each, and then appoint themselves officers and decide where their money goes. That's a private foundation -- no "public" support. But PTOs don't generally have this "problem."