Is it OK for a parent group to pay travel and training expenses for leaders? And if the PTO won’t pay, can you deduct the expenses on your personal taxes?
While nonprofit groups rarely pay their board members, they often pay all or some expenses of board members and officers.
Before your group starts doing so, it’s smart to have a policy in place to approve these payments. The policy may be added to the bylaws or be a simple resolution passed by the board. If the membership has voting rights on financial matters, then the membership should vote, as well.
Such a policy might simply state: Directors and officers of the organization shall serve without compensation, with the exception that expenses incurred in the furtherance of the PTO’s business are allowed to be reimbursed with documentation and prior approval.
You should require that the specific expenses be approved in advance by the PTO’s board (or membership). Also, require proper receipts and documentation. If specific expenses will be incurred yearly, estimate the cost and include it in the annual budget.
Decisions to approve or deny expense items should always be based on whether the activity will further the mission and tax-exempt purpose of the PTO. Specific individuals who will benefit from the approval of the activity—the officer who would be reimbursed for travel expenses, for example—should not vote on the matter.
What if your PTO won’t or can’t afford to reimburse for certain expenses? Can you deduct your out-of-pocket costs on your own taxes? It depends.
First of all, your group must be registered with the IRS as a 501(c)(3) nonprofit organization to take advantage of deductions.
IRS regulations let volunteers deduct unreimbursed amounts spent when providing services to a nonprofit group. This is true as long as the expenses are not personal, living, or family expenses. Travel expenses may be deducted as long as there “is no significant element of personal pleasure, recreation, or vacation” involved.
Therefore, if you plan to deduct expenses of volunteering on your personal taxes, it’s best to ask the PTO to pass a resolution requesting that you provide the service and stating that it will directly benefit the exempt purposes of the PTO. In addition, be sure to keep records and receipts to document the expenses.
Sandra Pfau Englund is an attorney specializing in legal issues for nonprofit organizations.