Your Local PTA Unit's Responsibility in Maintaining Your Non Profit Status with the IRS and More

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 Benefits of belonging to PTA 

-Alabama PTA State Office secures a Taxpayer Employee Identification Number 

-Your Local Unit PTA is not responsible for paying state or federal income taxes

-Donations to your local unit PTA are considered as charitable donations.  

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Requirements to Maintain Your 501(c)(3) Status

It is very important that PTAs maintain and protect their tax-exempt status. They must not violate certain IRS restrictions that apply to their 501(c)(3) classifications:

• Per the IRS, a PTA must file the appropriate Form 990 every year. There are no exceptions to this requirement. Not filing the Form 990 will place the PTA's tax-exempt status in jeopardy and may result in the PTA having to pay significant fines and penalties. If you discover your PTA is currently delinquent in filing the appropriate Form 990, contact your state PTA immediately.

• A PTA must be organized and operated exclusively for charitable, educational or scientific purposes (the mission as defined in bylaws).

• A PTA's resources and funds cannot be used for the private benefit of an individual.

• A PTA cannot engage in any political activity. The IRS considers political activity working for or against a candidate for public office at any level. Associations that are classified as 501(c)(3) are forbidden to support or campaign against candidates for public office.

• A PTA can only engage in an insubstantial amount of lobbying activity. PTAs are encouraged to advocate on behalf of the needs of their PTAs and their members, so be sure to understand the limitations.

Upon a PTA's dissolution, its assets must be distributed for one or more of those defined exempt purposes. Steps in dissolving a unit can be found in your bylaws. Before considering dissolution, please contact Alabama PTA office.

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File 990

File 990 is a software company Alabama PTA has contracted with to assist local units in filing annual tax returns. If your unit has not received an email reminder to file, you can go to File 990 website and start filing using your Employee Identification Number (EIN) to file 990N(gross income <50K) or 990EZ(gross income >50K and <200K) or 900 (gross income >200K) For more information on IRS Forms go here.

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PTA Funds vs School Funds

Falling under the Alabama PTA group exception is an important benefit of membership and sets us aside from other parent organizations where you would either have to secure your own tax exemption, or keep all your funds in a school account, which ultimately belongs to the school and is used at their discretion.  PTA funds and school funds should always be kept separate.  Per the Alabama Department of Education, school employees may not handle PTA funds.  They cannot be signers on your checking account, and they should not be collecting funds on behalf of PTA.  However, they may serve on your PTA Board as long as they are not on the banking accounts and do not handle funds.

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Common Reason to lose income tax exemption

Generally speaking, when a local PTA unit's tax exempt status is revoked due to non-filing of returns (990s), it is because during transition from one group of officers to the next, this vital information is not forwarded on to the next president and treasurer, therefor they are unaware of this responsibility.  While these requirements are always emphasized at State and Council training's and meetings, not all units attend training, and not all units are in Councils.

 

Please take the time to print out this explanation and make certain it is in the president and treasurer notebooks for your local unit PTA.