Landscape Structures Weevos

PTO Today

Helping Parent Leaders Make Schools Great

Hot Tip:

Members-only Extras

PTO Today Plus members enjoy savings on insurance, members-only articles, free samples and special offers.

Learn More.

Popular Topics

Advertisement
Innisbrook

This article is part of the following categories:
Bylaws/Nonprofit PTO vs. PTA Secretary


Your Group's Legal Status

Is your group tax-exempt? Incorporated? Does it have its own tax ID number? How to find out, and keep your legal records up to date.

by Sandra Pfau Englund

When I was elected president of the grade school PTO this past spring, I was told that the group was a nonprofit, tax-exempt corporation. I soon learned not to take anything for granted; neither the state nor the IRS had ever heard of our PTO. I learned a valuable lesson: It's important to check the legal status of your parent group and to make sure all the records are up to date.

Corporate Status

To find out whether your group is incorporated, you can first check to see whether a corporate database exists on your state's website. I typically start at Findlaw.com, a great legal portal.

On this site you can click on "Browse by Jurisdiction" under the "For Legal Professionals" column. Next, click on your state and then "Government Information." From here you'll need to look for the state's corporations office. Frequently the corporations office is found under the Secretary of State. Other times it's a stand-alone office. In Virginia I find it by clicking on "Independent Agencies" and then "Corporation Commission."

Once at the corporation site, you usually can find a searchable corporate information database. In Virginia it's called the "Clerk's Information System." That is because often (but not always) it is the job of the clerk of the corporations office to file and keep records of corporate documents.

If you're less Internet savvy, call your state's office of the Secretary of State and ask how you can find out whether your PTO is incorporated.

Federal Tax-Exempt Status

It's also a good idea to check whether your PTO has applied for and received recognition from the IRS as tax-exempt under the federal tax code. Federal tax exemption excuses the group from paying federal income tax on the organization's net income. IRS rules require that all individuals and organizations file the appropriate tax return if gross income is $5,000 or more. Without IRS recognition of tax-exemption, an organization cannot be sure whether it is exempt from paying federal income taxes on any net income.

To check federal tax-exempt status you can go to the IRS website at www.irs.gov. Once there, type "Publication 78" in the search box and then click on "search now." Note, however, that the IRS search does not always produce accurate results.

You also might want to call the IRS Exempt Organizations Unit at 877-829-5500. A warning: It may be difficult to get through. The IRS suggests that Tuesday through Thursday afternoons work best. I recently got through without a wait at 6 p.m. on a Monday.

EIN

Each organization should have its own employer identification number, regardless of whether the PTO is incorporated or tax-exempt. This is true even though the group has no paid employees.

An EIN generally is required to open a bank account. Frequently, however, PTOs use the school's EIN. To check whether your PTO has its own EIN, ask the school for its EIN. Then check the EIN being used for your bank account. If the PTO is using the school's EIN, you can easily get your own online at the IRS website, www.irs.gov. Simply type "EIN" in the search box. You may also apply by telephone or fax. Complete instructions are available at the IRS website.

Sales Tax Exemption

Exemption from sales tax is granted at the state level by the state taxing authority. Most states provide a sales tax exemption number that allows nonprofits to purchase things without paying sales tax. Frequently, however, PTOs use a school's sales tax number incorrectly.

While it may be legal to use the school's number for items purchased directly for the school, the PTO generally should not be using the school's sale tax exemption to purchase items for use by the PTO: materials for the fall fundraiser, refreshments for PTO meetings and events, and the like.

Ask the school for its sales tax exemption number to check whether the PTO is using the school's number or has its own. If the PTO does not have its own and wants to apply for one, go to the state website to check for information on how to apply.

Again, you might want to start at Findlaw.com and search the government information available for your state. States all differ on what types of organizations may obtain a sales tax exemption. Check the rules for your state carefully.

It's a good idea to start a corporate PTO notebook to keep legal documents. You'll create a valuable corporate memory for your successors.

Sandra Pfau Englund is an attorney specializing in PTOs and other nonprofit groups.



More information and ideas to help your parent group:


Sign up for our email newsletter and get the latest tips and expert advice delivered right to your inbox.


Rate This Article

(16 Votes)

Comments

  1. Posted by Carrie Williams on Jul. 10, 2008

    I just completed my first year as PTO president and found out about taxes.
    I have no clue what we should be doing?
    Is there someone, besides the IRS, that can walk me through how to fill out these forms. It is so time consuming and I just do not have the time.
    It was brought to my attention from our Treasurer that she thought we needed to do something. She was never shown from our previous treasure of 2 years ago. Now it looks like we are 2 years behind in filing. Someone please help I just do not know where to turn. Our school is in Roselle Illinois- is there someone I can talk to in my area?
    Thank you
    Carrie Williams

  2. Posted by Craig Bystrynski from PTO Today on Jul. 10, 2008

    Hi Carrie--I have two suggestions for you. First, the article "501c3 for PTOs" will give you an overview of the process of applying for official tax-exempt status from the IRS. Here's the link: http://www.ptotoday.com/pto-today-articles/article/394. Second, we have a toolkit that walks you through the process, including filling out the form line by line. We do charge a moderate fee for it, but it's very detailed and we spent many hours doing the legwork for you with the IRS. I think you'll find it helps a lot. It's the PTO Startup Toolkit, and you'll find details here: http://forms.ptotoday.com/store/product.html?id=1001. Good luck! -- Craig

  3. Posted by Penny on Jul. 26, 2008

    Are taxes files on the calendar year or the school year? Our PTO fiscal year is Sept - Aug.

  4. Posted by Craig Bystrynski from PTO Today on Jul. 29, 2008

    Hi Penny, When you file is based on your fiscal year. Your Form 990 is due on the 15th day of the fifth month after the end of your fiscal year. In your case, that would be Jan. 15. The story Tackling Your PTO Tax Return, http://www.ptotoday.com/pto-today-articles/article/392, provides more information and step-by-step instructions for filling out the form. -- Craig

  5. Posted by Kim Lane on Sep. 17, 2008

    Hi Penny, I just finished setting up our PTO. I am the treasurer it has taken about a year. I had an accountant to help me. But I am finished!!! If you still need help let me know. I live in GA.
    Kim

  6. Posted by Josei on Sep. 27, 2008

    I am the new president of our parent group and we are in the process of changing to a PTO. I spoke with the Secretary of State and we are not registered. But we are registered with the Dept of Revenue. Dept of Revue states that we can make the name change and just register as a Trade name and mail a letter to them and they will make the change to their end? We are making changes to our bylaws, does this mean I have to start from scratch and fill out form DR0175 New Application for Exemption? Help, I am so confused!!! Thank you***Josei

  7. Posted by Shelly on Nov. 04, 2008

    I too entered the long dark tunnel of filling out all of the paper work to become a non-profit... We took the easy way out. We held a sandwich sale and the proceeds went to pay a lawyer to do it all for us. We all feel much better about the whole thing knowing that someone who knows what they are doing is taking care of it all for us.

  8. Posted by Laura on Nov. 15, 2008

    Our district built a new 7/8 school, so the PTO expanded to become one PTO for the 5/6 intermediate school and the 7/8 Middle School. Now the two schools want their own individual PTO's so they don't have to 'split' the money that is raised collectively from the families of all 4 grades ( one feels they raise more money than the other). I wanted to talk to a PTO that may have already been through this. Trying not to reinvent the wheel.

  9. Posted by penny on Jan. 03, 2009

    I struggle year after year with filling out the tax forms for my PTO. I have called around the area and am unable to locate an accountant willing to do my taxes....and in all honesty, if I do find one I'm afraid they will find many mistakes I've made in the past which will create a big mess. Any suggestions?

  10. Posted by Interested Parent on Jan. 26, 2009

    I am interested to find out if Section 5310 (b) (1) of the Nonprofit Public Benefit Corporation Law of the State of California is available online. I tried googling it exactly as it is worded in our PTO's handbook but the items that come up have to do with CSU's. I put in a request to the PTO president of our school but as yet, I have received a copy.

  11. Posted by Stacy on Mar. 05, 2009

    Our school just formed its first official group of officers and bylaws. We have nothing from previous years that states we filed taxes.
    Can someone help!? We are not tax exempt. What do we do? Do we have to file? What will we need?
    I know absolutely nothing!

  12. Posted by Lisa Smith on May. 06, 2009

    I am having problems with our school trying to control funds of the pto. We opened our own account because it was approved by the pricipal and board. But some jealous teachers have went over their head to try to keep our funds and keep the PTO from participating. Can the school close our account and do they have the power to shut the PTO down? Where can i find information about how much power the school has over the PTO, especially to shut it down. Oh it's a Charter School, so I know its a whole different story

  13. Posted by Nadia on Jun. 05, 2009

    I know there is a $500 minimum of funds that should be rolled-over from year to year, but is there a maximum allowed? In others words do most PTOs spend pretty much what they make that year unless they're earmarking it for something big like a playscape?

  14. Posted by Lisa @ PTO Today on Jun. 05, 2009

    Hi Nadia - This is a good question for our message boards. I have re-posted your question here:
    http://www.ptotoday.com/boards/day-day-pto-management/22348-maximum-amount-funds-roll-over-next-year.html#post149541
    Good Luck ~ Lisa

Add Comment



Click to get a new image.