You're right on the hoop-jumping. A lot of it is crazy. If you want to just kind of blast through, then you will be OK, in my opinion.

But a lot of folks like to be very cautious on this.

To your specific question on the funds transfer, this is one of the areas where you'll want to be most careful.

If you do donate direct from the closing-down PTA to the opening-up PTO, then I'd make sure you've filed your Form 1023 (nonprofit status application for the new PTO) with the IRS before you make that transfer.

The PTA blows a lot of hot air on this switching stuff, but the IRS does not. The IRS wants to make sure that the funds remaining in the old nonprofit go to the a) the original nonprofit cause; or b) get transferred to another nonprofit. Your new PTO may not be a nonprofit yet. That would be an issue and is why it's sometimes best to make the two-step transfer.

Tim

We are also considering changing from PTA to PTO. If there is leftover funds and the PTA could make a "donation" to the school to use up the leftover funds could it also make a "donation" to the newly set-up PTO? Seems like an awful lot of hoop jumping.

Hi Ruth Ellen --

Let me try and put some answers in context...

Originally posted by Ruth Ellen:


Explain something to me. I know that we need to have our assets at nearly zero. Please explain why, and please tell me what to do if we have a large amount of money in savings--like over $5,000. What do we do with all of this money if we don't want to spend it right now?

Technically, what you're doing is closing down one distinct thing (your existing PTA) and opening up a completely separate distinct thing (your new PTO). You're not changing your PTA into a PTO. And similarly, you're not just making a name change.

In closing down, the existing 501c3 PTA, the IRS actually has some regulations about what can be done there. As an extreme example, the funds couldn't just be distributed to your officers. Because the funds were raised under the nonprofit umbrella, IRS expects remaining funds to go towards either the original nonprofit purpose or to another 501c3 (hopefully with similar purpose).

The IRS doesn't demand that you spend down to zero. The IRS does often recognize transfers of the funds from a closing nonprofit to an operating nonprofit. I often advise spending down to zero because it takes all the questions out. State PTA folks have nothing to bray about and it clearly satisfies IRS.

It's not the only option. Transferring from the closing-PTA to the new-PTO invites more scrutiny from PTA (primarily because it burns their backsides ). If you go that route, make sure you've already got your PTO up and running and have filed your 501c3 application. It would be a problem to transfer from your PTA to a non-nonprofit PTO.

Lastly, another common option is to donate the remaining funds outright to your school/district. The risk is that district could do anything they want with the funds. Often this kind of donation is done with an understanding that the funds will be either: a) used for just the kind of things PTA or PTO would do; or b) donated back over to the PTO once the PTO is established.

Can you please tell me about what to do about our tax exempt number, and what we are bound to--legally?--with PTA. I am not really sure how to proceed from here, but an attorney has advised that we are not able to just change over. As far as by-laws, we have by-laws for our local chapter. Where do you obtain state by-laws. I have never seen any.

If we were going to switch over tomorrow, tell me how. I am all for it, and so is everyone else, but we do not want to do anything that will compromise our group legally with PTA or anyone else in any way. . . Thanks for your help. . .Ruth Ellen

You should start the process of setting up your new PTO. You get your own EIN number (like a social security number for an organization) first and then you apply for nonprofit status using Form 1023 from the IRS.

We've written a complete, step-by-step guidebook for this called "PTO Start-Up". Highly recommended. Gives suggested answers for every question on these forms, etc. It'll be available for sale on our website next week. If you need it more quickly, call 800-644-3561 x 208.

Don't be overly intimidated. Tens of thousands of groups have done just what you want to do. It seems much harder/more confusing than it is. Push comes to shove, if you stop paying dues, don't have a membership drive and don't hold elections -- your PTA will be closed in no time.

Tim

Ruth -- WE're in the process of switching over as we speak. Email me at This email address is being protected from spambots. You need JavaScript enabled to view it. , I'll fill you in on how we're going about it and what we did with the money.

I don't want to post it on the board until we're done because I'm afraid if County gets wind of what I'm doing they will try to stop me. It may not be very legal according to their rules, but it's a great idea and can work out well for your group as well!!

We are still trying to get loose ends tied up on our PTA/PTO decision. I am the president, and I would really like for this to be changed over before the new year begins. All of our parents are aware of the change-over, and all seem to be supportive. Up until now, I have only served on PTO's, but I have never been on one during a transition.

Explain something to me. I know that we need to have our assets at nearly zero. Please explain why, and please tell me what to do if we have a large amount of money in savings--like over $5,000. What do we do with all of this money if we don't want to spend it right now?

Can you please tell me about what to do about our tax exempt number, and what we are bound to--legally?--with PTA. I am not really sure how to proceed from here, but an attorney has advised that we are not able to just change over. As far as by-laws, we have by-laws for our local chapter. Where do you obtain state by-laws. I have never seen any.

If we were going to switch over tomorrow, tell me how. I am all for it, and so is everyone else, but we do not want to do anything that will compromise our group legally with PTA or anyone else in any way. . . Thanks for your help. . .Ruth Ellen