Just to clarify, I stated that I would not expect a PTO to meet the requirements of a private foundation. It sounds like what you are saying is your PTO was determined to be one because it had not completed all the paperwork so that the IRS could make the proper determination. The IRS assumes you are a private foundation unless you show otherwise. So it is up to the PTO to supply the IRS with the proper documention. It takes 5 yrs of history to determine this, which is why the IRS requires you to file a Form 872-C with your Form 1023. This keeps the statutue of limitations open long enough for the IRS to make the determination. Once that happens, I do not believe many PTO's would be private foundations.
You make a good point. Just because most PTO's should not be private foundations, it does not mean the IRS cannot conclude that they are one. Good luck in getting yours straightened out.
WCE - Stated that she would not expect a PTO would end up meeting the requirments of a private foundation. She is wrong. That is what happen to my PTO. The past executive members didn't finish up all the paper work after the five (5) years and noww the IRS has us labeled as a private foundation. We found this out last year and are still working on getting back to a public supported organization. We are having a hard time since we only have 2 years worth of paper work to work with, need 5 years worth.
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.
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?
