Hi everyone, especially Phil who has helped me so much over the past year! I just learned that we are a non-profit with IRS EIN but we are NOT 501(c) as I was previously told we were. What is the difference? Is it based on how much money we earn each year or the balance of our bank accounts? We have accounts for each grade: 6ht,7th,and 8th.

Also, one of the amendments we had to adopt to go non-profit was a clause called "restrictive purposes and activities provision". It says something about not providing athletic equipment. Are you familiar with this? Does that mean we are prohibited from buying basketballs and footballs for the kids at recess?

I can tell you the fast path to formalizing...embezzlement!

All it takes is one unscrupulous officer, loss of funds, loss of credibility, ticked off school officials, angry/bewildered parents.

Suddenly everyone's on board. Rules, processes, 501(c)(3). Let's do it!

Not necessarily the path I would recommend, but I must say it was effective as a change agent.

[ 09-08-2006, 06:46 PM: Message edited by: JHB ]

Thanks for the hat tip Perusing!

We were in a similar situation. Unfortunately, I didn't know enought to recommend incorporating, but we went ahead getting a 501c3 anyway. The IRS "starts the clock" when your group formally decided to become an organization. This should be when you incorporate undr rthe laws of your state. In our case, it was when the membership approved our Charter (Articles of Organization).

In our 501c3 application we included past financial data from before the Charter was made, and the IRS approved our application without even asking about it.

I wouldn't worry about owing back taxes once you are taking steps to be legal. If the IRS found you for some reason and you weren't 501c3, then they may come after you for back taxes, but I find it highly unlikely in the circumstances you described.

Buckeye Treas,

You're not alone! I was with a group which had their current bank account for 36 yrs (at this point no one even knew whose ss# was being used)and we began the formal process this past spring.

When I found out we weren't non-profit and all the rest, well, I was very frustrated at how it was being run. Did I also say - our account was nearly always well into the $20K's++.

Our Board wasn't too responsive to the idea of changing or looking at becoming a non-profit. But with some continual talking about it from me and some others, we were able to express why we felt that it was so important. Please note this was a 2 yr. process, but at the time I wasn't the treasurer either.

Phil B. of MacArthur school has posted an awesome powerpoint presentation to help show the need and why/why not it's an important decision. Check out his site: MacArthur PTO

If you feel that the current PTO is resistant as a whole, maybe if you talk to a few people one on one and find out why, you may find yourself a support group. I think in our situation, the Board at that time felt overwhelmed by the papers & proceedings. When I stepped up and volunteered to be the point person, they were more willing to look into and understand the situation.

Just don't go bulldozing it saying "We have to", but you may also want to look at how you are organized and think about whether you wish to continue as the treasurer of the organization. (I.E. I've heard that many PTO's use their treasurer's personal SS# for bank accounts - DON'T DO IT!) I know their are many others out here with more wisdom and can probably put it more tactfully than I.

Best wishes - and come and ask questions around here. There is a wealth of knowledge willing to be shared by many!

We are currently doing the exact same thing, under the exact same situation. For us, we were looking into various grants, trying to get donations etc. I'm not sure if you have ever attempted this, but it is nearly impossible w/out a 501c3 tax id. We were able to get some small donations of merchandise & gift certs. etc., using our school's (town's) tax id.
It took us nearly the entire school year & a CPA to come and speak at a meeting to convince the group that this was the direction that we needed to go in, but we have finally begun the process. Right now, we are about to (hopefully) approve the (new) bylaws & will then be able to get our paperwork in. I know a lot of people will say that you don't really need one, but I highly reccommend a CPA's input. You can most likely do all of the paperwork & stuff yourselves, but if you have a parent or friend that is a CPA, they really can help you to know exactly what the IRS is looking for. There are particular things that the IRS wants you to have in your bylaws, etc. (I hear they can be pretty picky about the way things are worded.)

"And if I am defeated (ie they won't approve the $750 for the applications), then what are the potential reprucussions for the PTO?"

If you are defeated, try again. And again. Until they agree. Like Critter said, most likely, the IRS will never take notice, but does your group really want to take that chance, small as it may be? One way we helped our group decide was by making a Pro/Con. We brought it up at every meeting, constantly talked about the things we wanted to do, grants we could apply for & how 501c3 would make them easier/possible for us.
Good luck!

[ 09-01-2006, 05:07 PM: Message edited by: Lucella ]

We were in nearly the exact same situation when we finally learned about 501c3 and how it applies to "little ole' PTO's" too (from perusing this website just like you).

Fortunately, our PTO had never been incorporated, and we learned that the IRS views the incorporation date as the date your organization began, no matter how long it has existed in the past. Like CapeDad said, it's essentially the dissolution of your old PTO and the creation of the new one though not much really changes. There were no threats of fines and the IRS approved our 501c3 application no problem.

Sounds like you should move forward with getting the organizational house in order, with an eye on formalizing as an incorporated non-profit and then a federally-registered 501c3. For us, once we learned about all this, it was impossible to not do the right thing. If your PTO doesn't agree, the right thing is that you're a business in the IRS's eyes and should be paying income tax. Not saying that to scare you, but that's the official alternative. In reality, lots of PTOs (and no doubt other volunteer groups) ride under the IRS's radar, usually out of ignorance. But with the ignorance gone, it's hard to plead dumb anymore.