All About the PTO

Paul Adams Elementary PTO: A 501(c)(3) Nonprofit

(Rev. 4/ 2018)

The Adams PTO is a 501(c)(3) nonprofit organization that is totally independent from Adams Elementary School and from Lincoln Public Schools (LPS). The PTO is governed by its bylaws (revised in 2015) and guided by its mission which is to "enrich and enhance the education of the students; to strengthen communication between parents and staff; to promote school spirit; and to host activities of Paul Adams Elementary School."

 Although the PTO is an independent organization, the PTO must work closely with the school administration and must follow relevant LPS policies because of the nature of our mission.  For example, the principal cannot tell the PTO how to spend money, and the PTO cannot just install a piece of equipment on the playground without jumping through the proper hoops.

 

Types of Parent Groups

There are several different types of parent groups that may be affiliated with schools, including the following:

  • Committees or clubs. Some parent groups operate as a simple committee or club under the umbrella of the school and are not official PTOs and PTAs.
  • Parent Teacher Organizations. PTOs are independent groups that make their own rules or bylaws. There is no national PTO group or association.
  • Parent Teacher Associations. PTAs are branches of national association with specific rules and guidelines that each group must follow, and the PTAs must pay dues to the national association.
  • Community Learning Centers. In addition to the above types of groups, LPS has something called Community Learning Centers (CLCs), which serve functions similar to a PTO (offering clubs and resources); however, Community Learning Centers are funded by grants or have businesses that donate funds. CLCs are actually staffed by paid employees. The amazing clubs programs you may hear about at Title 1 schools are actually run by that school's CLC.

 

The Adams PTO:  EIN, Incorporation, and 501(c)(3) Nonprofit Status  

The Adams PTO is an official 501(c)(3) nonprofit, but many PTOs are not, as becoming a 501(c)(3) requires an application and fees to the IRS.

EIN. Before a PTO can apply for 501(c)(3) status, it must be given a federal identification number. This number is called the employer identification number, or EIN. It functions like a social security number for a business. A PTO also needs an EIN to open a bank account in the PTO's name. 

Nonprofit Corporation. The Adams PTO is officially incorporated. Incorporation is not required to be a 501(c)(3), but it provides some liability protection for officers. Nebraska state law dictates that the Adams PTO must renew its Nonprofit Corporation biennially.

The PTO's registered agent is Christopher S. Bartling, Attorney at Law, Bartling & Hinkle, P.C. (402) 421-1600. In January of the renewal year, the attorney should send a letter with renewal information to the PTO at the school's address. The PTO must file the "Nonprofit Corporation Biennial Report" with $20.00 renewal fee by April 1st of odd numbered years. 

501(c)(3) nonprofit status. 501(c)(3) is an IRS term for being tax-exempt. It refers to a section, subsection, and paragraph of the federal tax code. Section 501(c)(3) lists many types of organizations that are exempt from paying certain federal taxes, including those established for charitable or educational purposes like most PTOs. There are several important details to remember about 501(c)(3)s:

  • One distinct benefit to being a 501(c)(3) organization is that an individual or business making a monetary donation to the PTO may claim that deduction on federal income taxes. If the donation is over $250, then the PTO needs to provide the donor documentation of receipt of the donation (see sample letter).
  • 501(c)(3) organizations are highly regulated entities. Strict rules apply to both the activities and the governance of these organizations.
    • Generally, 501(c)(3) organizations may not participate in any political or substantial lobbying activity. Specifically, they may not make contributions to political campaign funds nor promote a particular candidate for office. Lobbying, or attempting to influence legislative activity, is only allowed if the expenditures are under a certain amount based on the size of the organization.
    • The "nonprofit" part of "501 (c) (3) nonprofit" means that the organization can't have shareholders who take money from the business, as a for-profit company does. No part of the activities or the net earnings can unfairly benefit any director, officer, or any private individual, and no officer or private individual can share in the distribution of any of the corporate assets in the event the organization shuts down.
    • Being a nonprofit does not prevent the group from making money to further its mission.
    • The PTO must file Form 990 with the IRS each year.
    • The IRS allows 501(c)(3) organizations to carry over as much money as its members see fit. The Adams PTO's goal is to carry over $20,000.

 

Important Notes about Taxes and the Adams PTO

Federal taxes. As a 501(c)(3) nonprofit organization, the Adams PTO is exempt from paying certain federal taxes, including those established for charitable or educational purposes like most PTOs.

State taxes. In Nebraska, school organizations such as PTAs, PTOs, booster clubs, and student organizations do have obligations for Nebraska sales and use taxes.

The Adams PTO is not exempt from sales or use tax.  The Adams PTO is required to pay tax on purchases for our own use and on purchases of property to be donated to the school. However, purchases made for purposes of resale may be made tax-free by completing a Form 13, Section A, as a retailer.

The Adams PTO is required to collect tax on taxable sales except admission fees to an event, meals or food products at events not open to the general public, and sales used to support school activities. So for example, we do fill out Form 13 for Valentino's and for the yearbook company as those are things that we resell. We do not have to pay sales tax to these vendors and we do not have to collect sales tax from our families when they purchases purchase these items from us.

For more information, please see, "Sales and Use Tax Responsibilities of Elementary and Secondary Schools, Parent-Booster Clubs, Parent-Teacher Associations, and Student Organizations" which is found at: https://www.revenue.nebraska.gov/info/6-466.pdf.

 

A Note of Caution

You might hear about other school parent groups in Lincoln and hear that they are doing other things. When it comes to these groups, however, sometimes it is comparing apples to oranges because of how each particular group is organized. Practices of another group are not necessarily how our PTO may be required to do things. In addition, even if a group has the same classifications as ours, an independent 501(c)(3), that doesn't mean that the other group is actually following the proper procedures (e.g., are strict guidelines from the IRS to maintain a 501(c)(3) status) or even following best-practices for a parent volunteer group (e.g., having 2 check-signers).