Thank you, that helps. I still have not made that phone call to the IRS...but I'll tell you what I observed which led me to believe that the policy was being misinterpreted. We were discussing potential donors, which for the most part are companies in our area, and for each company named, they were discussing whether or not the company was a public or private company, and they scribbled down notes for each one. I got the impression that they were noting each company and the amount that we would ask for, and were putting them into either a "public" or "private" category. I also got the impression that in the end they were going to make sure that the potential donations in the "private company" category amounted to less that those in the "public company" category. I remember thinking, that doesn't sound right to me! And I had to wonder if at some point they were going to say "Forget the last two in the private category, that puts us over our allowed percentage." But, I was very hesitant to say anything until I checked into it.
The precentage of public support has to do with contributions vs. government funding.
I work for an organization (not-for-profit) that gets huge amounts of government grants and contracts. We have to work at getting additional funding from individuals and foundations (public support) to keep our 501(c)3 status.
Yes, it is good that the board is aware of these issues (one or two people on the board, anyway), but what I worry about is misinterpretation of the IRS's guidelines which, to me, is complicating matters as we look for ways to bring in more money. Unfortunately there are "attitudes" at play here, and to question their interpretation would most likely lead to problems, as they seem to take all inquiries as criticism. That is why I want to be absolutely sure before I say anything, so I will call the IRS, and will look at the 990 forms. I had all of that information in front of me months ago when I was filling out the paperwork, but for some reason I have not been able to locate it again.
That level of detail is best answered by the IRS folks themselves. I know our 501c3 PTO is in a period of "advanced ruling" which I think means that in 5 years, we have to prove to the IRS that we are what we said we are. In the meantime, they trust us to be what we said we are in our 501c3 application. Our PTO, and I assume most all, fits the description of a publically-funded charity.
I just completed Form 990-EZ and Schedule A (the annual tax return for a non-profit) and it has a whole section on determing your source of support. If your PTO is really worried about this nuance, then you might want to download/order Form 990 and Schedule A and its instructions. Specifically, read Part IV and Part IV-A of Schedule A.
In Part IV, "Reason For Non-Private Foundation Status", on Line 12 (the one we checked), the characteristics include that you recieve no more than 1/3 of your support from "...unrelated business taxable income." That's a subtly that might apply to a PTO if the group has a retail business, for example. But like I said at the top, I'm just a mom, not an IRS rep - call them at 1-877-829-5500 and describe your specific situation. They are very helpful.
By the way, a donation from a private individual, like a parent, doesn't mean you are a private foundation. I think it's based more on the % of support. I'm impressed your board is even aware of these issues! I couldn't get anyone interested in this stuff.
I meant the minimum amount of public support. I guess what I really mean is what do we need to do to make sure that we do not cross over into what would be defined as privately funded? Is there a certain percentage of our income that cannot come from one specific source, or do we need to watch the total amount of donations from what would be considered private sources? :confused:
What do you mean by "the minimum to remain a public charity"? A minimum income amount? A minimum number of members? A minimum amount of work?
I'll assume for the moment that you're wondering about the minimum amount of work ...besides your running the group, the IRS requires the filing of an annual informational "tax" return called Form 990/990-EZ. Your state may have other requirements, too. For example, if your PTO is incorporated, you may need to renew your incorporation each year.
