Most parent-teacher groups operating in the U.S. today are not affiliated with the national PTA. In large part, these groups have decided to remain independent of the national PTA in order to avoid membership fees and dues.
The downside to being independent of the national PTA, however, is that administrative tasks, such as authoring bylaws and filing tax forms, incorporation, and exemptions, fall to the officers and members of the organization. Some of these filings and designations are optional; in particular, Federal IRS designation as a tax-exempt non-profit 501(c)(3). A PTO that has taken the time to obtain and maintain 501(c)(3) status can enjoy a number of benefits that can greatly impact their financial bottom line. Like all things worth having, though, there is a cost that comes in the form of time, effort, and money.
What are the pros and cons of filing for non-profit status?
In the long run, it is definitely in the best interest of well-organized PTO’s to file for tax exemption under the 501(c)(3). However, poorly run organizations with only marginal commitment from volunteers will find the returns are limited.
Those who benefit from the process
– are well-organized
– have dedicated members who will not only file to obtain non-profit status, but will also maintain that designation in the future (which requires filing an annual registration report at no cost)
– make a pointed effort to transition responsibilities and documents between new boards of officers each year Beyond these fundamentals, there are other pros and cons to consider.
* 501(c)(3) requires application to the IRS; the process is quite rigorous, but certainly not impossible
* Filing of the application requires a dedicated effort and time-commitment for volunteers
* It costs several hundred dollars to file, even if you do the work yourself
* Groups must know how they are restricted as a 501(c)(3); the IRS limits activities such as political activism, legislative activity, business activity unrelated to the organization and other activities
* Groups are exempted from paying Federal Income Tax (but not from filing appropriate tax forms)
* Groups are exempted from unemployment taxes
* Donations and in-kind gifts are tax deductible for donors
* Groups become eligible for bulk mailing permits/rates
* Grant monies (and grants of in-kind services) are much more widely available to non-profit groups
* There are many commercial and social sharing and networking websites that allow official nonprofits to register their group to receive either free advertising, or donations from visitors of these sites (for example eBay.com, Google.com)
Status as a 501(c)(3) organization lends credibility to an organization. Donors can see that there is documented proof of the organization and its function, and that they are not supporting an organization of questionable mission or origin. Non-profits with the 501(c)(3) designation can be researched by potential supporters on sites like CharityNavigator.org and Guidestar.org.
Most groups that are well-run find 501(c)(3) designation to be to their distinct advantage, despite the effort and cost.
Most PTO’s find that their efforts are more effective as they are able to designate more money for the betterment of their children and their school and the return on the cost of the filing fee is enjoyed in short time. For PTOs that plan to be in existence for a number of years (as most do), designation as a recognized non-profit works only to their advantage; for those of temporary existence, the process of filing a 501(c)(3) is probably not worth the time and money.
Are you ready for your own non-profit? Read Steps To Starting A Successful Non-Profit to get started.