dgleason18 - sure. Keep in mind that 501(c)(3) is a huge category. It includes everything from tiny organziations with a few thousand dollars to giant ones like United Way that administer millions. So the organization can have all the same processes as pretty much any business - investments, interest bearing accounts, employing staff, etc. (It would be unusal for a PTO to have employees...).
Also, if you file a 990/990EZ informational return with the IRS, you need to understand the mindset. With an individual or business filing, you are accounting for your income and expenses so taxes can be determined. With a 990 it's more an accounting that your operations are consistent with your charitable purpose and thus you are worthy to maintain the tax-exempt status. I think those of us who have been through it are all a bit surprised the first time on how the IRS "slices and dices" the information. But once you file one, then you know how track things for the next year.
Our elementary PTO used to have an interest bearing checking account and we had money in two different CDs(we were saving for a playground). If I remember correctly there is a place on the tax forms for interest earned.
Federal Income Taxes
PTO's operating as a 501(c)(3) charitable organizations are typically exempt from federal income tax. They file an informational return - either new E-Postcard or the 990/990EZ to provide required information, but don't pay any taxes.
Exception: if such an organization makes income in a way not consistent with its purpose, THAT income might be taxable. For instance, if a PTO sells concessions at a school activity, that fits. If a PTO opens a restaurant, that's really outside it's charitable purpose and might be taxed.
State Sales Taxes
You need to check the rules in your state to see how the PTO can be exempt and to what degree it's exempt. For example, in Texas we can be exempt from sales tax on (all) items we purchase and then from collecting/remitting sales tax on items we sell TWO times during the year. So we can have two tax-free fundraisers. But then we still need to collect/pay sales tax on more than two - such as t-shirt sales, which is ongoing during the year.
Organizational Status
You can be a 501(c)(3) by:
1) Formally: file form 1023 application with IRS and pay $750 fee and be recognized by the IRS
2) Informally: Follow all the rules of a 501(c)(3), make less than $5000 gross income per year and sort of self-declare yourself. (Note -since nothing is formal, hard to prove this status to donors.)
If a PTO makes more than $5000 gross per year, but has not applied for 501(c)(3) status, then you are operating "off radar". Thus you are in limbo becuase you aren't operating legally. If anything, you are a business.
