How to make your PTO tax-exempt. We sort through the mumbo jumbo and tell you what to expect—from the process and the IRS.

by Christy Forhan


Let’s start with a test. Question number one: When I see the label “501(c)(3),” I...

a. Feel confident
b. Start to sweat
c. Wonder what that means

If you answered A, your PTO probably has already completed the process to be recognized by the Internal Revenue Service as a nonprofit charity. Good job. If you answered B, you probably know enough about becoming a nonprofit to know it’s a good idea, but you may feel overwhelmed or nervous. And if you answered C, you live in blissful ignorance.

I lived in blissful ignorance for several years as a PTO member and officer. Back when I thought of our PTO as just a little group of active parents, it was easy to ignore any hint that we needed to be responsible to an outside authority. At that time, I was treasurer and our PTO was planning a major fundraising auction for the next fall.

I had started to see items about nonprofit status, the IRS, and 501(c)(3) in PTO Today and its online discussion forum. Somewhere along the way, I made the connection that if we wanted to solicit donations, we should be a “real” nonprofit organization. Aha! But just how do you do that? Interacting with the IRS was frightening. The whole process seemed too complex for our little organization. Why would a PTO need to be that official? Where on earth would I begin? I moved from blissful ignorance to controlled panic.

Like many other PTOers, I was under the mistaken impression that if we had our own tax ID number, then we were obviously tax-exempt. And if we were tax-exempt, then our donors could deduct their donations on their federal tax returns, right? After all, we had done an auction before, and nobody worried about 501(c)(3).

The whats, whys, and hows of 501(c)(3) and incorporation, plus all your FAQs

I bet you can find a member who will insist that if the PTO has a tax ID number, then it is automatically exempt. Heck, some people even call it a tax “exempt” number. Well, it’s not quite that simple. Soon I learned the tax ID number is just the first step to completing the application for nonprofit status. Clearly, I had some research to do, and then I had to sell the whole idea to our members. It was going to cost us several hundred dollars to apply for 501(c)(3) status, and I knew I had to have my facts straight and my justifications in line before our members would vote to spend that kind of money on something so intangible.

Getting Them On Board

Selling the idea of 501(c)(3) to a room full of PTO members is really an exercise in education. I wanted to help our members understand the benefits of nonprofit status without dragging them through the details of the application, called Form 1023. After I felt I had a good idea of why we should apply, I put together a short presentation for one of our monthly meetings. There were several key justifications.

  • Donations to the PTO are tax-deductible. This was our primary motivation to apply for 501(c)(3) status. We wanted the assurance that our auction donors could confidently deduct their donations on their federal income tax forms. We did not try to give tax advice, but we knew that having our 501(c)(3) was a good thing for our donors.

  • PTO purchases are exempt from state sales tax. In our state, Michigan, when a PTO earns its 501(c)(3) status, it automatically becomes exempt from paying state sales tax on purchases made by the PTO. Rules vary from state to state, but it is likely that your PTO could also enjoy this benefit.

  • 501(c)(3) status makes our PTO more credible and reinforces our independence. As our own official nonprofit organization, we are responsible only to our members. Though we have never had an adversarial relationship with the school or district, our 501(c)(3) communicates that the PTO is a legitimate, serious organization that is in this for the long haul. Oh, and you should know that even though the term is “nonprofit,” we are allowed to make a profit on our activities, keep savings in the bank year to year, and earn interest on our money.

  • Some grants and special postal rates are available only to 501(c)(3) organizations. Our PTO has not taken advantage of these privileges, but it is nice to know we could.

  • Otherwise, it’s possible we should be paying corporate income taxes. Personally, I do not know of an unregistered PTO being audited by the IRS, but it could happen. Maybe the IRS would be lenient and allow the organization to apply without penalty, but that’s not a risk I thought our PTO should take.

  • It’s the right thing to do. Once we learned about 501(c)(3) status for PTOs, it seemed we almost had a moral obligation to follow through.

Fortunately, our members voted unanimously to allocate the $500 for the application fee and we moved forward. (The fees have roller-coastered up and down since then—it’s now a flat $600 fee for groups applying using Form 1023, and only $275 for the simpler Form 1023-EZ applications.)

Luckily, I had several months between my aha moment and our auction. Good thing, because it took me nearly that long to get the application together. Do not despair if you are just starting the process; it probably will not take you as long as it did me. Today, there are great resources available to help you through the application—specifically the PTO Startup Toolkit and the wonderful knowledge pool on the message boards.

The effort and time it takes for you to complete the application is also influenced by other issues. Good record-keeping, help from fellow officers, and how long it takes to finalize key decisions will affect your timeline. Though the process should not become your full-time job, it could, realistically, spread over several weeks or even months.

Based on the amount of financial information required in the application, the treasurer is the logical person to complete it. However, if your PTO has another volunteer who is willing to take on an important and complex task, someone who will not give up until the job is done and is not afraid of numbers, writing, or the IRS, then you might choose to delegate the application process.

Incorporation—Yes or No?

Our PTO actually had two decisions to make. In addition to deciding to apply for federal nonprofit status, we also had to decide whether we wanted to incorporate in our state. I learned that if a PTO incorporates, a primary benefit is a form of protection for the officers, although the rules vary from state to state. In our state, when a corporation is sued, only the assets of the corporation are at risk; the assets of the officers are protected in most cases. That grabbed my attention when I realized the “assets of the officers” could be my house, my car, my savings.

Very quickly incorporation sounded like a great idea. For a fee of $20, the PTO was incorporated by fax in less than 24 hours. Not a big deal. Check with your state’s department of commerce or secretary of state’s office for information about incorporating.

But wait! If your PTO is considering incorporating, do this before you complete Form 1023 for the feds. As far as the IRS is concerned, a newly incorporated organization is a brand new organization, even if nothing else has changed. That means the new corporation would need to reapply for 501(c)(3) designation—another Form 1023 and another application fee. If your unincorporated PTO already has its 501(c)(3)status, you could go ahead and reapply with the IRS after you incorporate.

Advice From the Trenches

I have had the pleasure of completing Form 1023 for two different PTOs. In the process, I bumped into a few obstacles that slowed things down. Here is some advice that may help you avoid some of those same pitfalls.

Ask for help from fellow officers. There are several questions on the application about your PTO’s mission, purpose, structure, and activities. Try to delegate the writing of these answers to other officers so you can focus on the financial data required.

Read the instructions carefully. Spend some time poring over the instructions for Form 1023 with a highlighter and a clear head. You should also read IRS Publication 557, titled "Tax-Exempt Status for Your Organization." It talks about the rules and responsibilities of a nonprofit, plus it explains key terms. You can order the materials from website at no cost.

Contact the IRS for help. There will most definitely be questions in the application that do not make sense. Before giving up or guessing, call the IRS at 877-829-5500. Also, is jammed full of information and is easy to navigate. Look for buttons to direct you to “charities and nonprofits.”

Be sure your articles of incorporation or constitution has all the required language. The IRS requires specific language in your organizing document. (This is separate from your bylaws). See the PTO Today Startup Toolkit for lots more information on filling out the form.

Make copies of everything. Keep a complete copy of the application with all attachments for the PTO’s files. There is a lot of financial information required, so also keep a copy of the reports you used to substantiate the details in case you ever need to explain your answers.


When you get a Determination Letter from the IRS that says your application has been approved, it is a cause to celebrate. But that’s not the end of your responsibility. Each year, 501(c)(3) organizations are required to file Form 990, Form 990-EZ, or Form 990-N (depending on the amount of gross receipts collected) with the IRS. This form is essentially a tax information return, without any taxes owed.

Although the form is not due to the IRS until several months after the end of your fiscal year, it is a good idea to download the form and instructions as soon as possible. As you familiarize yourself with the form’s requirements, you might decide to restructure some of your financial data to make it easier to complete the form for you and future treasurers.

If your PTO is incorporated, you may also be required to complete an annual renewal form. Check with your state on its specific filing requirements and any fees that might be necessary.

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Originally posted in 2003 and updated regularly.


# Teri H. 2008-02-17 17:15
Hi Christy,

I would like some more information from you. Did you require your school to provide receipts for all purchases made with PTO funds? or did your PTO pay the vendor directly?

Our school had not in the past provided these receipts so when I became Treasurer, I started asking, but was up against a little resistance.

Do PTO's in your city give monies directly to the school or just product?
# Christy Forhan 2008-02-24 23:37
It's always good practice to get some form of receipt: a copy of the assembly contract or even a note signed by your principal accepting the $donation from your PTO. Keep with the corresponding transaction form. We sometimes pay the vendor directly, but sometimes its easier for the school to place an order using their district PO system, and then we'll reimburse the school (get a copy of the invoice). We budget specific amount$ that the principal controls for general categories (ex: building extras). We give him the $ when he spends it, not "just because".
# Siobhan 2008-03-04 18:00
Hi Christy --
GREAT article! I am a first year PTO president. I know our school is 501(c)(3) but I am unsure if we are incorporated. How do I find that out?
# Kristy 2008-03-06 08:50
We are currently under the school (charter school) which is run by a for profit company and we are a non-profit group. This sounds like a conflict to me and that we should have our own Tax ID number, 501 (c) (3) status. Our school board (one member) is over seeing us with a heavy hand. What is your opinion?
Thank you.
# mami 1978 2008-03-24 23:14
I have a question, in the above article about being incorporated , if i am one of the officer of the pto, do each of the officers have to fill out this form seperately and also have it documented with our personal accountant? or am i missing something. I honestly do not want to be a corporation, i thought that we can establish our bylaws and use the school tax id for our purchases and every month give the report tot he board member so that they can see what is going on iwht the spending and receiving of funds and we would be fine. Am i really foolish for thinking this way ?
# Kathryn Lagden from PTO Today 2008-03-25 11:45
Some good comments/questions here. Our message boards are a good spot to ask questions that are specific to your group. Lots of knowledgeable and experienced folks on the boards and our PTO Today experts regularly jump in with their insight as well.

The boards are at Select a category and then click "New Topic" to post your own question. Also suggest you use the 'search' link (left hand column) to see other discussions related to your question. If you need any help email me at klagden (at) ptotoday (dot) com
# Denise 2008-04-08 22:09
FYI, I just completed the filing of Form 1023 almost everything you said was dead on, by the prices have gone up $750 for larger budgets (over $10,000 annually) or $300 for smaller budgets
# Beverly 2008-04-18 09:26
I was wondering if the PTO can further be classified as a 509a3 supporting organization?
# Craig Bystrynski from PTO Today 2008-04-18 10:13
Hi Beverly--I don't know of any that are structured that way. I'd suggest contacting an attorney or the IRS tax-exempt helpline at 877-829-5500. (Despite their reputation, we've found the IRS to be quite helpful.)--Craig
# Laura Wiseman 2008-07-05 15:46
What documents are really necessary? Bylaws and Articles of Association?
or just Bylaws
# Lani Harac, PTO Today 2008-08-04 21:08
Hi, Laura -- The articles of association (sometimes called articles of incorporation) define the existence of your group; the bylaws determine how your group will be run. If your group incorporates (which we recommend), your state will probably require some form of defining document. If you do not incorporate, chances are you'll only need the bylaws. --Lani
# Karrie 2008-09-03 16:26
Can some please send me a copy of their Articles of Association, I am struggling to write ours and am not sure of the wording. Any help will be greatly appreciated.
# Karrie 2008-09-03 16:28
Oops! Just in case someone is willing to help here is my email address
# Kathryn Lagden from PTO Today 2008-09-03 20:37
Hi Karrie - Have you seen our File Exchange section? Great spot to look for sample documents since anyone can upload and share files.

I know there are sample articles of incorporation in the Plus members section but you need to be a Plus member to access -

We recently set up an area on our message boards for folks to request documents they couldn't find in the File Exchange. Suggest you repost your question here -
# Debbie 2008-09-06 09:29
I am the newly elected chair for our PTO. We are a Christian School with what everyone thought was a tax-exempt status. But now I am wondering if we should also be incorporating and filing a 501c3? Is a school run by a church truly an exempt in this situation as a PTO group? Thanks!
# Craig Bystrynski from PTO Today 2008-09-08 14:55
Hi Debbie, If your group is simply a committee of the school, you may be tax-exempt under the school's umbrella. However, most parent groups are independent organizations. If you have your own bank account and number and control your own money, you are probably independent. In that case, your group must file with the IRS under section 501(c)(3) to be considered truly tax-exempt. -- Craig
# Crystal 2008-09-17 02:09
If we do not have a 501 c than the people who make donations to us are not able to claim this as a tax deduction?
# Crystal 2008-09-18 03:18
If our PTO does NOT want to file for 501c3 status then what can we legally do to raise money? Can we still take donations, even if they are not tax deductable? Can we still take in revenue from fundraisers? Do we need to pay taxes on what we earn from fundraisers even though we will use the money to benefit the school? Yes That's what I need to know too.
# Jac 2008-09-19 02:26
As a 501c3 do you have certain guidelines you have to follow? Do you have to have a meeting once a month (or so) and invite all PTO members? Do you have to hold elections for board members? I'm asking because our PTO is a 501c3 and they have done none of the above in 3 years.
# Craig Bystrynski from PTO Today 2008-09-19 15:44
Jac, The organizational issues you're referring to are covered by bylaws. They're not related to a 501c3 filing (the IRS doesn't ask for them), but they are important. Get a copy of your group's bylaws, and speak up if they're not being followed. Are you sure your group is 501c3? It's not uncommon for new leaders to assume a group has that status, but no application has actually been filed. You can find out for sure by calling the IRS at 1-877-829-550. Ask the rep to check Publication 78, which is a list of all 501c3 groups. -- Craig
# jac 2008-09-19 21:14
The bylaws state that they don't have to meet regularly and they can appoint officers. I was just hoping the 501c3 might have guidelines about it. It is definetly 501c3, the principal and school board can't make them hold elections. 3/4 of the board don't have kids at our school. They have been running it for many years. Thanks anyway.
# Craig Bystrynski from PTO Today 2008-09-23 16:01
Hi Crystal--Lots and lots of groups don't have 501c3 status. I'm not aware of the IRS going after a parent group for taxes because it's not a registered 501c3 group. If you function like a typical PTO -- fundraise in the typical ways, spend the money you raise to support your mission, don't pay your officers, etc. -- you're probably not at much risk. (Note that this is not a legal opinion, just an observation.) On the other hand, the IRS only allows tax deductions for contributions made to registered 501c3 charities. So if you're not registered, donations can't be deducted. -- Craig
# ann wilson 2008-09-26 23:54
We need help right away!
We have been a very successful PTO for years now, we knew nothing about being a 501 c 3 organization. We have always had a seperate account from the school.
This year the school has a new principal.
She is very heavy handed and insists we put all our money in the school account.
As a PTO we do not like this idea, and have been researching about becoming a 501 c 3 organzation. The principal is not giving us enough time, she has insisted that we hold a vote this Monday September 29,2008. She also has stated that we cannot table the vote until we can gather futher information. I need something to tell the other parents before the vote. Please help soon
Ann Wilson
# Michelle Dowd 2008-09-30 02:59
Besides allowing donors tax exempt donations, how does becoming a 501 c 3 organization really help a PTO? It seems pretty expensive ($750). Does it open up officers to liability if sued, forcing them to become incorported for their own protection? Most groups have parents involved for 2 year terms. Without school oversight, what's to prevent new members from making poor budget decisions and spending irresponsibly if schools do not have final say over spending? Is it easier to prevent embezzlement if the PTO bank account held by the school? Why not allow the schools to help protect the hard earned funds? Can schools access or freeze the funds of a 501 c 3 PTO if things have gone amiss with the group? Or, are the funds untouchable by the school, no matter what happens, with a 501 c 3 gropu? What if no one steps up to be treasurer? Who would be in charge of the bank account? What becomes of the funds if the 501 c 3 PTO dissolves?
# PricklyPear 2008-10-01 19:43
To Michelle -

Good questions, I am asking many of them myself. Here are my observations and I'd love your thoughts.

1) having 501 status can help by legitimizing your organization with donors and the community, and if you don't want to pay taxes (while remaining legal to state and federal laws it appears the way to go.
2)I have no idea about liability of officers; however, I can't see it increasing it since corporations generally protect from liability. Insurance coverage can cover the organization and it's officers (and volunteers) fully, I believe. There may be civil liability, but I assume that won't increase or decrease with incorporation/501 status.
3)People make bad decisions, and your bylaws and articles should deal with that (or procedures in absence of either).
# PricklyPear 2008-10-01 19:44
4) The only way to prevent embezzlement, IMO, is with open disclosure and a competent treasurer, and religious adherence to organization rules (receipts, disclosure, etc.). An employee of the school district can be just as crooked as a volunteer.
5) How exactly is a school to protect the funds? Funds are "safe" in an insured bank account. School discretion to spending and safety are two different things.
6) Have no idea about schools requesting to freeze funds. I'm sure procedure for freeze, seizure, and award are dealt with on a state and federal level and laid out in articles, bylaws etc.
7) Bylaws/articles determine officers (or lack of), financials, etc.
8) 501's have the right to give their money to any other 501 (could be the school or another group).
# cheryl perry 2008-10-23 23:25
Hi our pto council is now looking into filing 5013c we have diffrence people trying to tell us all the long hard things about filing . please advise us on doing this matter we need help very fast and soon please . that's something that as a council we want to see happen for the council
# Craig Bystrynski from PTO Today 2008-10-30 15:45
Cheryl -- Applying for 501c3 is time-consuming, no doubt about it. I strongly recommend that you get our PTO Start-up Toolkit. It walks you through the application process step by step and the application form line by line. We spent many hours talking with the IRS to put it together. It will save you a lot of effort. Here's the link: -- Craig
# Anita 2008-11-03 22:06
If we are a tax-exempt PTO, do we have to pay taxes on fundraiser items? We have a tax ID # but I am being told by the fundraiser company that we still have to pay taxes. We are in California if that makes a difference.
# Craig Bystrynski from PTO Today 2008-11-07 17:47
Anita -- Parent groups generally don't have to pay sales tax on fundraiser items in California. You'll find specific language in this pdf from the State Board of Equalization, pages 27-28. -- Craig
# Mary 2008-11-25 22:16
Our organization never applied for tax exempt status as we were tax exempt by statute (under 5,000 income). But we may soon be over that amount. I was told today by someone at the IRS that we could possibly be included as tax exempt under PTO Congress of Illinois group exemption , does anyone know about this?
# Mary 2008-12-07 08:10
I have been doing gift wrapping in Borders Store for 2 years, in order to raise some fund for my Organization. This year they told me I can't do it again because I don't have 501(c)3. Where is the problem? They said that officially I can be in trouble, why? They provide me with the material and people donate in the donation box after I gift wrap their books.
# George 2008-12-13 22:59
We are putting the final touchs on our Form 1023. We are looking at running a program to reduce tuition for needy families. This situation would commonly be called a scholarship but it appears if we call it a scholarship program, we have to complete Schedule H. We are talking about a couple of thousand dollars total so Schdule H seems like overkill. The PTO start up toolkit, page 34, para 13.f.i.ii mentions "a mini-grant (or similar) program". I do not recall another mention of a mini-grant program. I am wondering if a mini-grant program would encompass what we are trying to do.
Couple of questions:
What is a mini grant program?
Does anyone (with approved 501(c)(3) status) run a "needs based" scholarship program without completing Schedule H? If yes, how do you do it, what do you call it.

Thanks in advance for any assistance.
# Jean S 2009-01-26 00:08
As a not-for-profit, are you required to manage your income and expenses so that, for the most part, you break-even every year? Is it proper to show a substantial amount of net income? Otherwise, aren't you taking advantage of the donors if you solicit contributions when you aren't spending the money?
# John 2009-01-27 01:16
Our Private School PTO was formed 50+ years ago. It used the same employer ID as the Corporation (Church). Having done so, can the Church use PTO funds legally, to keep from having to close the School due to low enrollment? They need the money from the PTO to pay salaries and expenses or may have to close the School in June or sooner.
# Liz 2009-02-26 18:57
Our group is looking for any information available on switching from a PTA to a PTO. We already have 501(c)(3) tax-exempt status for our group. Does anyone have specific information on the exact steps we need to take when our group changes organizations? When I contacted the IRS they told me that I needed to contact PTO for the information.
# Kasey Repass 2009-05-07 01:18
I have the same question as Jean S on Jan 26th above...anyone know if you have to break even or if you can carry over a profit from year to year?
# Tim Sullivan PTO Today 2009-05-07 14:10
A few answers to various questions posted here:

RE: end-of-year. There is no rule that you have to spend all your money each year. In fact, it's a good practice to maintain some cushion. I think it's nice when groups can start the year with service and involvement events, as opposed to being forced to start only with fundraisers to fill empty coffers.

The IRS restricts just what not-for-profits can do with their excess funds (can't go to individuals), not when you have to spend those funds.

RE: PTO v PTA. Check out the PTO v PTA link at the very bottom of this page. Tons of info there.

# Staci Page 2009-08-08 11:56
How much money can be held in a savings account by PTO (501C3)?
Thanks so much!
# Craig Bystrynski from PTO Today 2009-08-10 19:24
Hi Staci,

There's no limit on how much money you can keep in a savings account. If you have an amount of money you won't be spending for some time, you can even check out certificates of deposit and other safe investments where you might collect a little more interest.

# R.C. 2009-08-17 13:11
We have all new officers in our PTO this year. We are a 501(c)3 organization. We have been told by previous officers that there are many rules and regs that have to be followed. I have worked for two other 501(c)3 organizations and have not found the rules & regs to be that bad. They have a notebook about two inches thick of materials concerning the application, but can't seem to give us some basic rules. Where can we get these?
# Craig Bystrynski from PTO Today 2009-08-18 13:11
The IRS has a pretty good publication about the requirements for 501c3 charities -- and it's just a few short pages:

In brief, if you spend your money in ways that match your mission (helping the school), file an annual tax information return, and avoid endorsing political candidates, you're in good shape. The chief concern for most groups is keeping good financial records, which are necessary for the tax information return.

# Jaymie 2009-09-09 03:25
Our children change schools every 2 years. Would like to pursue the 501C3 for all schools together in our county. Is this possible? Wish to get us all on board together and then if parents can and wish to volunteer, they will be ready to go. Can you have several schools on one 501C3? Can each school then have a separate financial account? Thanks!
# Craig Bystrynski from PTO Today 2009-09-09 13:52
Hi Jaymie,

You can definitely do this. I believe the way it typically works is you form an umbrella organization (a countywide or regional PTO) and the school PTOs become sub-groups of that organization. It's more complicated than setting up a single school PTO as a 501c3, but it can save a lot of money in application fees. The IRS can give you more information (use the nonprofit helpline: 1-877-829-5500), and you might want to chat with an attorney who has experience with nonprofits.

# Chaundra Haynes 2009-11-17 20:04
Can a private (for profit) school have a non-profit PTO? I thought I read somewhere that it's possible, but I want to double check.
# Linda 2009-12-22 15:34
Unfortunately, the state of Mississippi does not have a provision in the tax law to allow PTO's or other small non-profit groups to be sales-tax exempt even if they obtain 501(c)(3) status from the IRS. Our PTO filed the Articles of Incorporation through the Mississippi secretary of state's office with the intention of obtaining 501(c)(3) non-profit status primarily so we could be sales tax-exempt. It is not possible without getting a law passed. Check with your state's sale tax commission before going through this process if you hope to be sales-tax exempt.
# Amanda Martinez 2010-04-08 21:36
Hi, Chritsy,
I am the current president of our PTO and wasn't given many records. I'm not sure if they ever filed taxes. I know the tax exempt number for the PTO, but that is it. How can I find our if our pto has the 501(C)(3) status?
# Sylvia Lima 2010-06-19 13:47
thank you
# Bethany 2011-03-31 00:40
Thank you SO MUCH for this article! It has helped me tremendously.
# Bethany 2011-03-31 00:40
Thank you SO MUCH for this article! It has helped me tremendously.
# Cindy Kerns 2011-04-12 13:12
I am the new PTO President, and the past PTO have been using the schools TIN# to be tax exempt. They recieved donations for a Business. I found out they have only been meeting as a PTO no formal Bylaws, no job discriptions, or how things are ran. Thepast PTO Board was asked to leave and now they will not help. HELP! Should I formalize this PTO into a 501(c)(3) or RUN?
# Craig Bystrynski 2011-04-12 13:30
Cindy -- Definitely don't run -- it sounds like your PTO really needs you! I'd recommend working on building involvement, putting systems into place, and writing bylaws to start. Once you feel comfortable that your group is operating on an even keel, then you can begin the process of applying for 501c3. If there have been recent donations to your group, you should let those businesses know that those donations aren't tax deductible. Explain the mistake and that a new board has taken over. You might offer them some free exposure (signs, thank-you announcements at your next event or in your newsletter, for example) as a way to apologize, if needed. Good luck, and please keep us posted on how things go.
# Trisa 2011-05-23 00:26
I am the new PTO president for our school. I am researching the 501c(3) status which would allow us to file for grants as well as solicit corporations for larger donations. My question is about the names on the application. To file for an EIN, an officer name is required, same for the corporation status and again, the same for tax exempt status. Since the officers change from year to year, who's name should be filed on all these legal documents and what risks are there to that particular individual?
# Rebecca Benjamin 2011-06-06 12:56
I am the new Treasure for our school PTO and contacted the IRS for a copy of our 501(c)(3) letter of deterination. To my surprise they told me we are a 501(c)(4). Is there a differnce in the disignation? Is it true that 501(c)(4) contributors can not clam their donnations as tax deductible? Should I try to change the disignation? Is there any easy process? Your help is much appricated.
# Stephanie 2011-08-09 14:51
I am basically starting over with the PTO for our school since they haven't had one in 3+ years. I am really freaking out about this 501c3 form issue because we don't have the money to pay the fees.

What is the difference of being a committee with the school and being a PTO? If it's easier to just be a committee for the school, why doesn't every school do this instead of forming the PTO?

Also if my name is shown as the direct contact on the EIN and I am no longer the President, will I be held liable for anything the future officers do with the PTO?
# Laura Bowie 2011-09-14 17:14
If a PTO organization has been operating for several years and not paying sales tax on fundraising items, what would be the implications of now filing for the tax exempt status? Would it shine a spotlight on the past practices of the organization?
# Craig Bystrynski 2011-09-14 17:27
The IRS has been pretty clear that their priority is to get groups into compliance. I haven't heard of any groups that have applied for 501c3 and then been penalized for not having applied earlier. Also, for the purpose of tax-exemption, the IRS considers a group to be "new" on the date they incorporate. You could incorporate and then apply based on your incorporation date.

Also, just a note that 501c3 is exemption from federal (and often state) income tax. Sales tax is a state matter, and many states exempt all or some fundraising from sales tax.
# Sean 2011-09-28 20:09
Is it right or legal for a PTO to operate under the school's 501(c)3?
# Dan 2011-10-17 20:22
We’re a relatively new PTO and we’ve been fundraising to pay for enrichment programs in our school. We need to better understand the financial issues around this fundraising.

We’ve also heard, but cannot confirm, that there are spending requirements associated with our 501(c)(3) status:

* Are we required to spend all of our donated funds each year?
* What kind of account should we use for long term financial support?

- simple bank account
- fiscal sponsorship
- donor advised fund
- private foundation (seems heavy duty)

We’re not wealth, but we do want to stay legal.
# Kristy 2012-02-11 06:00
If your PTO does not get 501 (c) (3) status, do they have to pay taxes on their income and do they have to file taxes?
# Craig Bystrynski 2012-02-11 15:16
Kristy -- I suppose the technical answer to that is yes, if you're not tax exempt you owe taxes, but it's not quite that straightforward. There are a lot of PTOs operating in a sort of limbo where they function as nonprofits but haven't filed for official 501c3 status. The IRS has told us their goal is to get those groups to file for 501c3, not to make them pay taxes. To move toward that goal, the IRS lowered the filing fee for the smallest groups and created a very simple annual return (form 990-n).

The consequence we've seen for groups that haven't filed for 501c3 and have come to the attention of the IRS is a significant fine and a lot of backward accounting to verify their revenue.

If your group has basic organization in place, enough to be able to account for and file annual paperwork, it makes sense to apply for 501c3 status.
# Jessica 2012-02-23 00:09
When completing Form 1023 (line 1), would our PTO have to include revenue from Labels for Education? If so, how do you place a value on this?
# Rose C. 2012-02-27 21:51
Hi Jessica,

Regarding your question on Form 1023 and Labels for Educaiton, here's what we have learned from our call to the IRS: Put the estimated value of the items you got from LFE on Line 7, Part IX, and explain what it is on the attached itemized list as requested. Unless the PTO has an incredibly loyal and robust LFE program, the value is probably a very small part of their overall revenue. Please stay in touch if you need more information and I hope that helps, Rose C.
# Jessica 2012-02-28 00:48
Thank you for the quick response. Would we also want to put the amount in the expense area (possibly line 23) if we received the products from the LFE program, however, gave them to the school to use?

Thanks again
# Stacy 2012-09-05 22:55
What are the restrictions of 501c3
If we are selling entertainment books are we allowed to give out cash prizes? Prizes at all?
# Larry Beyer 2013-08-15 17:04

Great article; very helpful Like you I am in Michigan. One of the steps I've been told we need to do in setting up our PTO is to register with the Attorney General's office as a Charitable Trust. This is after we have submitted Articles of Incorporation on Form CD 502 and simultaneously as we are requesting a determination from the IRS. When I spoke to the AG's office, it seemed that they may have periodic filing requirements if our PTO meets certain criteria. This is independent of the IRS, the State Dept. of Licensing and the State Dept. of Treasury. Did you run into the same thing? Is this an easy process? What are the ongoing obligations?


# Anon 2013-08-16 00:04
I have a dilemma. I recently was given a PTO with NO paperwork other than bank statements. The legal details are sketchy. The last PTO president isn't forthcoming.

The bank account claims to be non-profit but the IRS has no record of it. The EIN is not that of the school, I don't know where it is from - no paperwork. The PTO isn't registered with the state as a corporation or a non-profit. I have no records of any tax filings.

I have inquired with the IRS about the EIN, but time is short and I need to get this year going. To start anew would relieve me of responsibility for the last sloppy PTO president's sins but it would also plaster my name all over the PTO - something I want to avoid because I want someone else to take over after my term. And it would cost almost a thousand dollars.

# Craig Bystrynski 2013-08-16 13:56
Anon -- Although they seem like the same thing, there's a distinction between being nonprofit and being tax-exempt. If you operate like a nonprofit, you can be considered a nonprofit. But to be officially tax-exempt, you must file form 1023 with the IRS.

Lots of PTOs operate as nonprofits but don't officially have tax-exempt status. However, the IRS is increasingly cracking down on that. They want all small nonprofits to register.

I would think you could sell that message to your PTO without being the bad guy: We've operated this way for a long time, but now the IRS is making all nonprofits apply for tax-exempt status. So we need to start the process.
# Margaret in IL 2013-10-19 16:33
Does anyone know if it is in violation of the 501c3 status if a PTO "sells" required gym uniforms and makes a profit? Assume it is not stated on the gym uniform purchase form that "such and such" dollar amount of the cost of the uniform will go to the PTO.
# Craig Bystrynski 2013-10-21 13:53
Hi Margaret -- Selling gym uniforms as a fundraiser won't jeopardize your 501c3 status. It's a fairly common practice and well within IRS rules. -- Craig
# Ted 2013-11-22 18:18
A long time ago, our pto/pta was part of the school and even included in their budget. Over the years, it broke out and incorporated and received 501(c)(3) status.

Does anyone know if legally, the school district can state that the PTO, independent/non profit charity, must seek approval from the school committee for fundraisers and events? Seems to me that the school committee and the schools would not want to be seen as 'operators' of a non-profit.

Certainly the PTO should work with the school and school committee but people are a little hung up on 'asking permission'--seems to unnecessarily complicate the PTO's efforts.

# Elise206 2016-08-19 13:34
This article is wonderful! I'm in the exact same position the author was in. I'm just curious if anyone has followed her advice more recently? I'm in NJ. I'm planning to file to get incorporated. Then I plan to file the 1023 using our incorporation date as the start date of our organization. We have an existing EIN number from a few years ago- but ONLY that paperwork had been done (to facilitate having a bank account). So my only concern is, will filing the 1023 cause the IRS to dig into our history prior to incorporation? Or do they just tend to appreciate that organizations are putting effort in to do the right now thing going forward? Thanks for any advice!
# Lani @ PTO Today 2016-09-06 19:43
Hi, Elise206 -- Incorporation makes your group a brand-new organization in the eyes of the IRS, with no history associated with it. And in our experience, the IRS is not looking to punish school PTOs and does appreciate good-faith efforts by groups to set things right. You are planning the right moves by incorporating first and then filing Form 1023! -- Lani @ PTO Today

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