Basics of PTO Organization

1
Basics of PTO Organization

• Sandra Pfau Englund
• Pfau Englund Nonprofit Law, P.C.
• Alexandria, VA
• 703.304.1204 sandy_at_nonprofitlaw.com

2
How is your PTO organized?

• Unincorporated volunteer parent group?
• Stand-alone nonprofit tax-exempt corporation?

3
Advantages of incorporating your PTO

• Decreases personal liability of officers/members
  of the group
• Decreases liability if former group did not file
  appropriate tax returns
• Increases credibility

4
Disadvantages of incorporating your PTO

• Cost/paperwork
• Incorporation (75)
• VA annual reports (25)
• NOTE IRS return required for all groups with
  5000 gross receipts

5
Disadvantages of incorporating your PTO

• May raise concern of school administrators
• While both unincorporated and incorporated PTOs
  are usually, legally, organizations separate from
  the school, incorporation highlights the
  separation
• School administrator participation can be
  addressed in bylaws

6
Advantages of tax exempt status for your PTO group

• The 5,000 rule
• Qualify for state sales tax exemption
• Eligible for grants
• Credibility
• Process
• File IRS Form 1023

7
Disadvantages of tax-exemption for your PTO group

• Cost/paperwork
• IRS filing fee 500
• Legal fees (1000 or more)

8
Incorporation Liability

• Liability of unincorporated PTOs
• Need for insurance
• School insurance often does not cover PTO
  activities, whether unincorporated or
  incorporated
• Schools may add rider to cover PTO activities
  whether unincorporated or incorporated
• Insurance is recommended in regardless of
  corporate status

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Recommendations

• Incorporate PTO
• Apply for federal tax-exempt status 501(c)(3)
• Apply for state sales tax exemption
• Obtain insurance coverage (either under school
  policy or with a separate policy)