I agree absolutely that ethics is a consideration. After all, if nothing else, we should be role models for the kids.
But not all these groups know what their numbers are. They may not have a history or things may be changing. For one group I was involved in, the big fundraisers were moving back to the school. Based on other activities, the remaining revenue would probably be $8,000-$12,000.
I work with yet a different group that runs all big fundraisers through the school (and the school owns the funds). The PTO stays below $5000 and has no reason to go the 501(c)(3) route.
My point is, if you don't know - you aren't obligated to aim "high". Maybe in this case it's better to aim low.
We've had an "informal" group for too many years. They had a budget with revenue close to $50K. I'd be hard pressed to come up with an activity plan and budget at or below 10K. I think I'd have plenty of teed off parents for dropping so many of our programs. Not to mention, the Fall Fundraiser gross revenue usually is around $25-$30K.
As anal as I am and Rule Bound - I have a hard time working on the loop holes of being a new corporation without paying the lower fee and dropping our budget out.
Plus, if I understand the 1023 correctly, I'm asking for an advance ruling and in a number of years I have to substantiate for them. It would seem at that time I would be showing the gross way above right from the start which would raise flags with them.
JHB, you're thinking...but doesn't that seem a bit too shrewd? After all, if your PTO has been in existance for a while and has experienced real revenue above the $10k gross, and all you do is incorporate to create the "new" organization, then you really have no reason to think you wouldn't still run over the $10k level. Nothing's really changed just because you incorporate.
You pose some food for thought, but I would have a hard time ethically justifying low-balling the PTO's income projection. Sure, it really wouldnt' hurt anybody. The IRS would still get the $300 fee, but it just seems not right.
What happens if you aim low and exceed your estimates?
Most of us filed for 501(c)(3) status by creating a "new" organization (at least on paper). As a new org, we have no history - only projections of future revenue.
If you project less than $10,000 gross per year for the first 4 years, you only need to remit the lower of the two fees (now $150, about to be $300).
So what if you are wrong? What if you do earn more? I don't see anywhere where you have to pay the difference in the fee.
Ugh! Okay, I'm in the middle of working on my 1023 right now. In fact, I came on to post a message and saw this. I went to IRS sight and found this out:
At the bottom is an adobe file showing the prices going up for initial fees to $300 & $750. Now I'm going to need to go back to the board for approval for the additional amount.
