[MurrayMatters] Tax Information

[Susan Weiner]

    IMPORTANT PTO  INFORMATION:  VOTING REQUIRED               March 27, 2006
           Dear Parents, 
           As we discussed at the beginning of the year, it behooves an  organization periodically to review its guidelines and its operating procedures.  The Executive Committee, along with many  dedicated parents, teachers, staff people and professionals, has spent many,  many hours researching tax options for the PTO to become compliant with IRS  regulations and writing new bylaws to reflect the way the PTO functions.  After many months, we are reaching the  conclusion of both of these journeys.  Soon,  the tax issue will be settled, and then the bylaws can be finalized for  distribution, discussion and approval.  
           As you may know, the VL Murray PTO is currently in  noncompliance with IRS regulations since it raises more than $5,000 in gross  revenues and has never filed any tax documents.   Although we believe that Parent Teacher Organizations are low on the  priority list of the IRS, the fine for noncompliance is $10/day plus interest  for every day past the required filing date.
           
  The Executive  Committee has carefully studied all possible options for becoming compliant and  is recommending the PTO become an Unincorporated 501(c)(3) tax exempt entity.
           In our effort to reach this conclusion the following options  were reviewed:
           Option 1: channeling  all PTO funds through the school so that the PTO is no longer a separate entity;
           Option 2:  becoming an Incorporated 501(c)(3) tax exempt  entity; 
           Option 3:  becoming an Unincorporated 501(c)(3) tax  exempt entity; and lastly,
                   Option 4:  becoming a tax paying entity. 
  
  These options have been researched through conversations,  e-mails and meetings between the Executive Committee and  Randy Jones, a non-profit accountant at  Robinson Farmer Cox Associates who serves the county, as well as through  considerable individual research with IRS representatives on the tax exempt  hotline, and various local accountants.     
          In point of fact, the only feasible options available to the  PTO are to become an Unincorporated 501(c)(3) tax exempt entity, or to pay  taxes (Options 3 and 4 above).  According  to the IRS:
  
          o If the       PTO raises more than $5,000 in gross revenues, then it is required to file       a Form 1023, which is the application to become a tax exempt 501(c)(3)       organization.  There is a one time       filing fee for Form 1023 of $500.  As       part of this process, the PTO would file for its own EIN (employee       identification number mandated by IRS).        
               
   o  If the       PTO raises more than $25,000 in gross revenues (which it has consistently       for several years), then it is also required to file a Form 990 or 990EZ       at the end of each fiscal year.  
           
      After becoming a 501(c)(3), direct donations to the PTO  would be considered charitable donations and eligible for deduction on the  donor’s annual tax filing.  The PTO would  be required to perform an annual audit.  As  a 501(c)(3), the PTO would be eligible for grants from a variety of government  agencies and corporations.  The PTO would  also be eligible to request Virginia Sales Tax Exemption.  This would eliminate paying sales tax on  purchases made in Virginia by the  PTO.  Several elementary school PTOs in  our district have taken this approach including Hollymead, Baker-Butler and Red  Hill.  
           Although at least one school in our area is an Incorporated  501(c)(3) tax exempt organization (Meriwether Lewis), we do not consider this  to be a viable option because it appears that PTO officers could become more  vulnerable to a lawsuit rather than less as an incorporated entity since the  PTO insurance would be primary in the event of a lawsuit.  Thus Option 2 is not advisable.  
           We gave Option 1 considerable thought and in the end the  Executive Committee along with Mr. Grider decided that it was unwise to burden  our current hardworking staff with the responsibility of another $40,000+  operating budget.  As a result of our  discussion, however, the Executive Committee may recommend some changes in our  operating procedures to streamline reimbursements to the school and teachers.  We will pursue this discussion further at a  later date.  For now, the Executive  Committee has ruled out Option 1 as a possibility for coming into compliance  with the IRS.  
           Hence, after much work, the Executive Committee has  concluded that our only viable options, given the amount of money that we  raise, are to become an Unincorporated 501(c)(3) or to become a tax paying  entity.  The Executive Committee is  recommending that we become an Unincorporated 501(c )(3) organization.  There  will be a meeting on Tuesday, March 28th, from 7:00-9:00 pm in the school library to discuss these  options.  Please plan to attend this  informational meeting to discuss this important matter. 
           Attached is a ballot for voting on the tax option that you  think best serves the Murray Parent Teacher Organization.  Since each parent/guardian is a member of the  PTO with voting privileges, please return two ballots per family.  The teachers/staff also each have one vote.  Please return the ballots directly or via back  pack mail to Betty Knight in the office by Tuesday, April 11th.  
           If you have questions subsequent to the meeting, please  contact Susan Weiner by e-mail at susanfweiner at yahoo.com or by phone at  825-1646.  Andy Grider and Susan Weiner  will jointly respond to all questions.    
                                                                                                                Thank  you.
                                                                                                                                       Susan Weiner
        PTO  President
      

  
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