My two cents (I am not a lwayer...):

By all means, if your state PTA rep is saying that, then that sounds fine. I wish more state PTA reps. would be as common-sensical. Often the reason for being so overly cautious about the transfer of funds is a "walking on eggshells" fear of the PTA folks.

On a side note, you shouldn't have to pay taxes on the interest income provided that you start the 501c3 process relatively quickly. For a new organization (and you can likely claim that your PTO is a new organization), the IRS allows 27 months to apply for 501c3, and -- once the application is approved -- the exemption is retroactive to the start date of your group.

Hope that helps.

Tim

Hi mabes -

Couple of reactions/questions:

1. I'm interested to know what requests you're abiding by. What requests/demands were made?

2. The approval process for getting your 501(c)(3)may take several months, but the most importnat thing to note is that -- once approved -- your 501c3 will be retroactive to your date of application. If you're starting an entirely new group (the way I'd recommend you go), then you actually have 27 months to get approved, and -- once approved -- the 501c3 is retroactive to the day you started your group. Sooooo, provided you apply relatively soon after you get your PTO started, then there's a very good chance of there being no gap in your nonprofit status at all.

The experts I've consulted report that the vast, vast majority of PTOs are approved. (I've personally never heard of a single denial). There's a certain percentage of applicants that don't gain the 501c3 status, but in almost all cases that's because the applicant didn't complete the process, not because the IRS denied.

As a side note, the first "Expert Guide" available through our new National PTO Network ( www.PTOtoday.com/npn ) is called "PTO Start-Up" and it covers the incorporation and 501c3 process (and much more!) in great detail.

Hope that helps.

Tim