Finances

 

FAQs: PTAs Non-Profit Status

What documentation is needed to prove our non-profit status as a PTA Unit?

When PTA Units are asked to prove their 501(c)(3) nonprofit status, they need to supply the following documentation – all of which is provided by California State PTA:

  • A letter from the IRS verifying the Employer’s Identification Number (EIN - the federal ID number) of the Unit. All units received one when they were first formed, but that paper is probably long ago buried. The EIN can also be found on your Audit Report Forms. If you’re unsure of your Unit’s EIN, contact the Peralta District PTA President as we maintain a list of all Unit and Council EINs.
     
  • Letters of determination that were issued in the 1940's by the IRS and in the 1970's by the State of California stating that the California State PTA is in fact a nonprofit organization.
     
  • A cover letter of "affiliation" that California State PTA provides stating your unit is in good standing and falls under the State PTA nonprofit status.

How do I get this documentation?

The PTA president or treasurer requests a Letter of Determination from the California State PTA office by contacting lod [at] capta.org.

In your request, remember to include:

  • Reason for the request (e.g. need for a matching grant, bank requirements, etc)
  • FAX number (if you have one)
  • Unit President's name and home address

After receiving the request, all of the documentation needed to prove your Unit’s non-profit status will be mailed to the home address of your Unit President of record. And it will take approximately 7 to 10 days for this to be accomplished.

EXAMPLE:
As an example, all banks now require PTAs opening a bank account to supply documentation that includes:

  • Copy of IRS letters of determination as proof of 501(c)(3) status
  • Copy of PTA association minutes recording the election of officers
  • Copy of PTA Unit bylaws

Once you get this packet together, keep it in an accessible place, perhaps in a permanent binder that goes to a new Unit President or Treasurer with each new school year.

Budget

During the summer, the president and treasurer should prepare a preliminary budget that should be presented at the first executive board meeting, also taking place (hopefully) in the summer. Input from all board members should be considered. All budget items start at zero – there is no carryover from the previous year. There should be no commingling of funds from teacher fundraising, student body accounts, or booster clubs. The IRS considers all money deposited into the PTA account to belong to the PTA. Any commingling of funds will jeopardize your private, non-profit status.

A sample budget can be found in the Toolkit under Forms. In addition, an Excel unit budget / annual financial report form has been placed here for your convenience.

Sample Unit Budget / Annual Financial Report / IRS Worksheet

End-of-Year Financial Report

The fiscal year for all Fremont units is July 1st of one year to June 30th of the next year. The End-of-Year Financial Report is completed by the treasurer after the close of books June 30th. This report accompanies the books to audit.

End-of-Year Audit

After reconciliation of the bank statement in July, the treasurer gives the books to the auditor. If your unit does not have an auditor, please contact Fremont Council for recommendations.

IRS 990/990-EZ/990-N Informational Tax Return

All PTAs must file informational tax returns with the IRS. Failure to do so will result in the revocation of the PTA's exempt status. The forms filed according to gross income are the 990-N (e-postcard), the 990-EZ, and the 990 along with any required schedules.

The 990 / 990EZ / Schedule A forms needed by 501(c)(3) organizations can be downloaded from the IRS web site at www.irs.gov under Charities and Forms. If your gross income (everything you deposit into your bank account plus interest and minus per caps paid to council) is over $50,000, you will be filing 990EZ.

Although PTAs do not pay taxes due to their non-profit status, they are required to file informational returns. It is the responsibility of the previous year's treasurer to see that these forms are completed. It is the responsibility of the current board (whether the previous treasurer is a member or not) to see that this requirement has been fulfilled. If the treasurer or other board member is not comfortable with filling out the form, professional help can be sought. Tax return preparation is a legitimate PTA expense and can appear in your budget. Non-compliance with IRS regulations will result in a fine of up to $20 a day, not to exceed the smaller of $10,000 or 5% of the gross receipts, for late returns.

FTB 199/199-N

All PTAs must file informational tax returns with the FTB (Franchise Tax Board – State of California.) Failure to do so will result in the revocation of the PTA’s non-profit status.

The 199 forms needed by 501(c)(3) organizations can be downloaded from the FTB web site at www.ftb.ca.gov. Go to Forms and Publications and type in your tax year and your form number (199). You can download the form and the instructions.

RRF-1 Registration Renewal Form (updated)

The California Attorney General oversees charities to protect charitable assets.  The Registry of Charitable Trusts requires charities to register and file annual financial disclosure reports with the Registry using the RRF-1 form.  The registration renewal form is due four months and 15 days after the end of the fiscal year or November 15th.
 

Raffles

All raffles must be registered with the Registry before conducting a raffle using the CT-NRP-1 form.  The raffle registration period runs from September 1 through August 31.  Raffle registrations should be made 60 days prior to holding a raffle.  Your PTA will receive a letter confirming registration.  Once your raffle is completed a raffle report is due to the Registry using Form CT-NRP-2.See the Guide on Charity Raffles and checklist for more information.

 

There are additional reporting requirements (IRS Form W2-G) for winnings of $5,000 or more or if the winning amount is more than 300 times the cost of the ticket. Consult the IRS web site for these requirements.

Tax Information

District and Council PTAs are not allowed to instruct units on how to fill out 990 or 990-EZ IRS Informational Tax Returns. The official policy of the California State PTA is that the unit should hire a professional to aid in tax return preparation and that this is a legitimate PTA expense. We are allowed, however, to give you information on how to prepare your budget, your treasurer's reports, and your annual financial report in order to facilitate the organization of your data for the tax accountant. Here are several documents that may aid in your data organization.

Treasurer's Report

A treasurer's report should be given at every meeting detailing income received and checks written. It should include a beginning balance and an ending balance. A year-to-date total of all budget items is a nice addition to any treasurer's report. The report is not approved by the board; the correct wording by the president is: "The treasurer's report will be filed for audit." If the unit has a financial secretary, this report can be give before the treasurer's report. The principal duty of the financial secretary is to collect the money counted by fundraising chairmen and deposit it in the bank. It does not matter who deposits the money, the treasurer or financial secretary; the money should be deposited as soon as possible.

Cash Verification Form

The most important document for units in dealing with PTA money is the Cash Verification Form. There are three versions of the form listed below. It can also be found in the Toolkit that all unit presidents receive. There is also a CD of the Toolkit with downloadable forms; it can also be found on the State PTA web site under Finance/Forms. www.capta.org The form requires the signature of two people who have counted the money; more signatures can be obtained if desired. DO NOT SKIP THIS STEP! Make sure your handwriting is legible to avoid discrepancies in the deposit amount. Attention to the small details with this form is critical to proper record keeping by the financial secretary and the treasurer.

Per Caps Remittance Forms

The due dates for per caps are listed on the Home Page. The remittance form for Fremont Council units can be accessed at: remittance form.  Fill out both the top and bottom of the form and send it to the council financial secretary; one copy will be returned to you as a receipt.

Insurance / Workers Comp

All PTAs are required to carry insurance and Workers Comp (even though you may have no employees.) The premium is a joint premium and is renegotiated each fall by the State PTA with our insurance company. The president has a copy of the Insurance Loss and Prevention Guide that is sent in the fall mailing. It details coverage that your unit has. It also has a valuable section on "Green Light Activities" – activities that are acceptable; "Yellow Light Activities" – activities that may need permission or additional insurance; and "Red Light Activities" – activities that are prohibited under all circumstances. Holding a prohibited activity may void your insurance for the year. Contact the insurance company if you have any doubt about an activity. Please turn in insurance/Workers Comp form on the regular Fremont Council remittance form along with the State Workers' Compensation Annual Payroll Report form which is found at: Workers Comp form.

Every PTA must complete the Workers' Compensation Annual Payroll Report regardless if wages are paid or not. Starting in 2020, all Workers Compensation forms must be filled out online.  Base rate insurance will cover gross wages of all persons hired up to $1,000, including payments made to independent contractors for services performed between January 5 of the current year until January 4 of the subsequent year. Any wages in excess of $1000 will result in an additional premium of 5 percent of the wages. Forms and any additional surcharges are to be sent directly to AIM insurance.  On the form, list only those employees that PTA pays directly. Do NOT list names when monies are donated to a school district for employee salaries. Do NOT list company names.  If the PTA has NOT hired employees or independent contractors, check the "NO ONE PAID" box. Otherwise, PTA must report all paid workers. Be specific about the type of work and the dates.

If PTA hires employees, and if an employer-employee relationship exists, the PTA, as employer, must comply with all state and federal withholding requirements. For each employee listed on the Workers' Compensation Annual Payroll Report, PTA must also attach copies of quarterly reporting forms. The California State PTA recommends that any PTA hiring an employee or an independent contractor secure professional services for processing of wages, withholding and reporting forms. Each of the quarterly reporting forms also has an annual form due at the end of the year.

Again, if the total payments (gross) for ALL employees are more than $1,000, PTA will incur an additional premium. To calculate the new premium: subtract $1,000 from the total (gross) payments for all individuals paid for the period being reported; multiply the balance remaining by 5 percent and forward that amount through channels by the district PTA due date. For example: $2,500 total (gross) payments, less $1,000 = $1,500 balance; $1,500 x 5% = $75. This is the additional premium that should be sent through channels.

BONDING INSURANCE: Bonding insurance covers all PTA districts, councils, and units and all persons handling funds and PTA assets. The blanket bond provides $25,000 coverage for embezzlement, robbery or theft. There is no coverage under the bond for mysterious disappearance of funds or if bond policy conditions were not met. There is a $250 deductible. Higher insurance limits can be obtained for an additional cost directly from our insurance carrier AIM Association Insurance Management, Inc., 8144 Walnut Hill Ln Suite 900 Dallas TX 76231 (800) 876-4044 or FAX (214) 360-0802 Email: CAPTA [at] aim-companies.com

Fundraising

Fundraising projects must appear in the budget and have the approval of the membership in advance of the event. The project must support the goals of the PTA and be related to the educational, charitable and philanthropic purposes of the tax-exempt organization. Funds are exempt from income tax because a majority of the work is performed at the unit level by volunteers.

Sales Tax

Sales tax is paid by units at the time of purchase. Consequently, resale use permits are not required by units to conduct sales of those items. Units are exempt from collecting and remitting sales taxes for items sold. Units may have to inform the vendors of their exclusion status and insist on paying sales taxes to the vendors. Units may have to adjust vendor invoices to reflect sales taxes. If units are unable to obtain the cooperation of the vendors, they may have to consider using different vendors. If no other vendor is available, sales taxes should be remitted by the unit to the Board of Equalization via written letter. For further information, the web site for the Board of Equalization is: www.boe.ca.gov.

Employers

For clarification of determining whether a person is an employee or an independent contractor, see the California State PTA Toolkit (5.6.1.)

Due to the increasing reporting requirements of the State of California, the State PTA recommends that if you want to pay someone for a service, you go through your school or school district. The school district, in paying the person, assumes withholding responsibilities and also liability for the employee / independent contractor.

Inventory

The California State PTA Finance Commission has developed helpful guidelines to aid in keeping track of inventory. The following is a document of sample inventory report forms: PTA Inventory.

Other Financial Topics

The California State PTA web site has an excellent section on specific questions on the topics of sponsorship, Scrip, fund raising, carry-over funds, budget, banking, taxes, E-commerce, check writing, audit, commingling of funds, treasurer, and gifts to schools. Please access: www.capta.org/sections/finance/faq.cfm.

Last Updated: 
08/09/2022