Both can save money, invest funds, apply for grants. Both are types of 501(c)(3) organizations. There are differences the way the IRS views it, but I don't thoroughly understand the nuances. Here's some info:
A public charity (identified in IRS terms as "not a private foundation") normally receives a substantial part of its income, directly or indirectly, from the general public or from the government. The public support must be fairly broad, not limited to a few individuals or families. Public charities are defined in the Internal Revenue Code under sections 509(a)(1) through 509(a)(4).
A private foundation, sometimes called a non-operating foundation, receives most of its income from investments and endowments. This income is used to make grants to other organizations, rather than being disbursed directly for charitable activities. Private foundations are defined in the Internal Revenue Code under section 509(a) as 501(c)(3) organizations which do not qualify as public charities.
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I'm a board member of our district's educational foundation. It's much more about raising "big" money and represents the entire school district, not one campus. We have a large board (25+) but there's no general membership. The Board is the organization and the organization pretty much exists to raise funds.
Hopefully with a PTO, fundraising isn't the primary goal - it's one path by which they make their programs happen. PTO's typically exist for volunteer coordination, encouraging parent involvement, supporting school programs, etc. PTO members are involved in the activities on their campus; they don't just exist to distribute funds.
As far as I can tell, an educational foundation's big reason for existence is to raise major funds. I guess the bottom line (to me) is:
I could see a PTO existing with no fundraising. There are still many things they could do/services they could perform that don't cost money.
I don't think there would be any point to an educational foundation without fundraising.
This may only reflect the ones I've been exposed to; so definitely solicit feedback from others.
I believe that as a PTO(non-profit org), you can invest money if you choose. The PTO I was part of at the elementary level, had some CDs(money we were saving for a big playground project) and we applied for and received some grants. The difference in name is probably nothing more than that--a difference in name and maybe their scope. Are the LEFs getting funding for a whole school district whereas your PTO just handles your individual school?
I'm treasurer of a very active PTO that has been in existence for over 30 years. We have EIN, Tax Exempt Status # from State of NJ, by-laws, file taxes, etc.
I am gathering information about Local Educational Foundations. Apparently this type of structure can keep and invest donated money and apply for grants. Need more info, please!
What is the legal difference between a PTO and an LEF? What is the difference in tax structure?
