QUESTION:
Our
PTA is tax exempt under Section 501(c)(3) of the Internal Revenue Code. We are very fortunate in that our fundraising
has been so successful that we have more funds on hand than we need to operate
the programs we have planned. Because we know that not every PTA is as
fortunate, some members have suggested that we donate some of our funds to PTAs
in other parts of our district that don’t have the same fundraising capacity
that we do. Is that something that PTAs
can do, and if so, are there any steps that we would need to take before doing
so?
ANSWER:
This is one of those seemingly simple
questions for which, unfortunately, there is not a simple answer.
First, consider the question from the perspective of the
Bylaws. If the donation is in the budget that was approved by the members, or
if the Board or Executive Committee has discretion under your PTA’s standing rules
to make disbursements not authorized in the budget, then making a donation to
another PTA would be consistent with the Bylaws. If the donation is not in the budget or not
otherwise authorized, you would need to have the budget amended at a general membership
meeting before proceeding.
However, the answer doesn’t end. You also need to review the application that
your PTA completed when it applied to the Internal Revenue Service for tax
exempt status. Because your PTA is tax
exempt under Section 501(c)(3), the form that you completed is called the IRS
1023 (it’s an IRS 1024 for PTAs that are tax exempt under Section 501(c)(4)). The application sets forth the activities
that your PTA told the IRS it would engage in, and the grant of tax exempt
status is limited to those activities. Many PTAs’ 1023 speak to operating
programs for the benefits of the students at XYZ school (i.e. the school with
which the PTA is associated). If that’s the case with your PTA’s 1023, you would
need to let the IRS know that your PTA’s scope of activities has expanded to
include benefiting other students in your district or community. To do this you only need to submit a letter
to the IRS when you file your next tax return (990 or 990EZ) explaining that
your activities have expanded.
Finally, if the PTA (or for that matter any other
organization) is not tax exempt under Section 501(c)(3), then you should place
a condition on the donation that the funds can only be used for a tax exempt
purpose. Otherwise, your PTA could be
considered to be diverting tax exempt funds for a purpose that wouldn’t qualify
for tax exempt status.
