Schools have always needed the support of the communities they serve, and they need it now more than ever. As the economy continues to falter and educational funding is cut, many schools are struggling to make ends meet. This is where Parent Teacher Organizations (PTOs) come in, and where raising money for schools can literally mean the difference between success and failure.
While all PTOs have the same basic goals, and use similar methods to reach them, they’re not bound by a national organization or its rules. Each individual PTO can decide how involved to be, how to go about raising money, and whether to pursue 501(c)(3) tax-exempt status.
PTO tax-exempt status
A common misconception is that simply having a tax ID number automatically gives a PTO tax-exempt status. Come on, we’re talking about the IRS. Did you really think it would be that easy?
An organization that wants to acquire tax-exempt status must apply for it and have it approved by the IRS. It’s advisable to go this route before taking on any fundraising for a couple of reasons.
First, it will prevent the PTO from encountering any problems with the IRS and possibly being penalized if proper procedures aren’t followed when raising and spending any money. More importantly, it will allow money raised to go to the school rather than toward any taxes.
Since the goal is to raise as much money for the school as possible, it’s to everyone’s benefit to complete the application process before embarking on any fundraising endeavors.
If a PTO becomes a 501(c)(3) entity, all members must adhere to all the accompanying IRS guidelines. For example, if even one member were compensated with PTO funds for providing any kind of service to the organization, the PTO would be in violation of Internal Revenue Code and could be fined, or even lose its tax-exempt status. Make sure you know the rules, and that everyone follows them.
Once all the legal stuff is out of the way, it’s time to raise money for the school!
PTO fundraising guidelines
Because PTOs don’t fall under the umbrella of one national organization, they have the freedom to choose what kinds of school fundraisers to hold, and how to go about planning and managing them. There are still some things to keep in mind:
- Every PTO member has the same goal in mind, but might have different ideas about how to reach it. Allow all members to participate equally and provide ideas and suggestions for fundraising.
- Create committees to handle different parts of fundraising planning. One committee can be responsible for researching fundraising companies, while another works on finding appropriate venues.
- Make sure the committee heads keep the PTO President and Treasurer informed about all fundraising planning efforts.
- Keep all receipts related to fundraising! We can’t stress this one enough. You’ll need them when it comes time to file taxes, and it’s a key part of maintaining the PTO’s tax-exempt status.
- Before holding any fundraisers, be sure to obtain any necessary permits you may need.
- If you plan to hold a fundraiser at the school the PTO supports, be sure to coordinate with the school well in advance so there’s no conflict on dates when the school might have activities planned.
- Ensure that any vendors who participate in your fundraising efforts have the proper permits and insurance for liability and workers’ compensation, and can show proof of both.
- If your PTO does obtain 501(c)(3) status, strictly follow the guidelines, and make sure all organization members do so as well. For example, because no private entity may benefit from tax-exempt status, no member of the PTO will be able to write a thank-you note to any business that sponsors a PTO activity. Know the rules and follow them to the letter.