All Arizona PTAs or PTSAs are classified as tax-exempt 501(c)(3) public charities under the Internal Revenue Code (IRC).
One major advantage for organizations that are exempt under Section 501(c)(3) of the IRC is that contributions to such organizations may be deductible on donors’ federal income taxes. In addition, PTA members who receive only minimal reimbursement for their PTA-related expenses may be able to treat the balance as a charitable gift. Examples of possible expense deductions include transportation, telephone calls, meals, and lodging. Consult current IRS rulings for allowable deductions.
It is very important that PTAs do not jeopardize their tax-exempt status. They must not violate certain restrictions that apply to their 501(c)(3) classification:
- As a 501(c)(3), a PTA must be organized and operated exclusively for charitable, educational, or scientific purposes (the mission as defined in bylaws).
- A PTA’s resources and funds cannot be used for the private benefit of an officer or director (private inurement).
- Upon a PTA’s dissolution, its assets must be distributed for one or more of those defined exempt purposes.
- A PTA cannot engage in any political activity. Associations that are classified as 501(c)(3) are forbidden to support candidates for public office.
- A PTA can only engage in an insubstantial amount of lobbying activity (see pages 50 and 51 or PTA Money Matters Quick Reference Guide for more details).
Employer Identification Number and IRS Form SS-4
Upon charter or starting a new PTA, Arizona PTA will apply for and acquire an IRS Employer Identification Number (EIN, or FEIN [Federal Employer Identification Number]).That number is a part of the permanent record of the local PTA and is also on file in the state PTA office. This number should be used for bank accounts and will be required for filing IRS Form 990.
Determination Letter of Federal Tax-Exempt Status and IRS Form 1023
PTAs can generally qualify for exemption from federal income tax. Arizona PTA has secured from the IRS a group or blanket federal income tax exemption under Section 501(c)(3) of the Internal Revenue Code; this group or blanket exemption applies to the state PTA’s local units and other constituent bodies. For a copy of determination letter, please contact Arizona PTA at 602-279-1811
State Sales Tax
PTA is not exempt from sales tax in Arizona. Example: PTA hosts a book fair and the final bill has sales tax included. The PTA will have to pay the tax from their profit or increase the amount on each product to cover the tax