CO and Pack Funds

[kmorley971]

Setting up new checking account for our Pack led to request to our Chartered Org (PTA) for use of the tax id #. This flagged them for liability concerns about having responsibility for the Scout funds absent direct oversight and implications for IRS reporting (might bump them into next bracket so more paperwork).

 

I cannot find any specific guidance from BSA on the tax implications for the CO as the pack is subordinate to them with or without using their tax id. Can someone provide a clear answer so we can move forward...perhaps this why previous account was a personnal account vs commercial.

[ScoutNut]

You can look on your council web site for info on unit finances, or contact your council.

 

If your CO will not allow you to use it's EIN, your unit should get it's own. Complete IRS form SS-4, found on the IRS web site. There is no charge for this.

 

Edited to add that at no time should the SSN of a unit leader be used.

(This message has been edited by Scoutnut)

[kmorley971]

Okay but even if we have our tax id do the funds we raise have any tax reporting requirements for the PTA that sponsor our Pack.

[ScoutNut]

Your CO might want to check with the IRS themselves so that they are clear on their Federal, and state, tax obligations.

 

 

[John-in-KC]

While Federal law is consistent, State law is not.

 

Contact your DE at Council. Ask to speak to the Council CFO (probably a volunteer) or the General Counsel (certainly a volunteer). They can help you with details for where you are.

[packsaddle]

This is actually an opportunity to build a closer relationship with the CO. Instead of going for a separate bank account, try to build a sub-feature of the CO budget for the Pack. Then the CO can write the checks for Pack expenses and have complete oversight over Pack finances. This would have been a wonderful improvement over what the Pack had back when I was CM.

In this way, checks to the Pack are actually written to the CO but earmarked for the Pack. This could mean that donations that benefit the pack would be tax-deductible if the CO is a 501c3 organization. It also means that the Pack treasurer can be easily replaced without having to worry about signing rights, etc. Moreover, the Pack treasurer merely needs to keep a 'shadow' spreadsheet of finances in order to help the CO people keep track of everything.

Just a thought.

[shortridge]

This flagged them for liability concerns about having responsibility for the Scout funds absent direct oversight and implications for IRS reporting (might bump them into next bracket so more paperwork).

 

Have a heart-to-heart meeting with your PTA leaders, COR and DE to outline the obligations of a CO. The PTA's lack of understanding of the CO's relationship to the pack is telling. The PTA can have all the direct oversight it wants - it owns the pack. As for IRS reporting - did no one explain how this works when the pack was chartered in the first place?

[kmorley971]

Well that is perhaps part of the issue since before I took over this year as CM they were using a personnel checking account. There is no institutional knowledge and I am trying to rebuild relationship and met with the PTA Board this morning to discuss. However, the inability to get a straight answer from BSA HQ site or local council is honestly very frustrating and does not build confidence with the CO. Lacking a clear statement on financial relationship between units and COs from BSA or local council could potentially put more distance between CO and the unit since the president is extremely sensitive to any possibility of liability for the PTA, rightfully so, but the more I explained how the unit is subordinate to the CO the more concerned she became...I pick an exit ramp by offering to get comment from a nearby pack with PTA sponsor. However, I was kinda hoping to gather a little more intel myself so I can be educated on the matter as much as possible. All these comments have been useful.

[ScoutNut]

The IRS has a toll free assistance line for exempt organizations. You, or your PTA President could call for info on Federal taxes. A call to your state's Dept of Revenue would give you answers on state taxes.

 

As for a CO's liability, and even tax questions, you should contact your Council Service Center and ask them. These are not new questions, and most councils have a financial person who can answer them for you.

 

If you do not feel you are getting any help, call your District Executive and state that your CO is seriously considering dropping your charter if their questions are not answered. That will get his attention.

 

 

[CalicoPenn]

If the PTO is a tax-exempt organization, they should have no worries about being bumped into the next bracket because there are no brackets. If they aren't a tax-exempt organization, they should be asking themselves why not.

 

As sponsor of the Pack, the Pack becomes part of the PTO's program, and any revenue brought in for the Pack can be offset by expenses for the Pack, just like any revenue for the PTO is offset by expenses for the PTO. There shouldn't be any tax liabilities - and it doesn't add to the reporting.

 

But technically, if you are using the PTO's EIN, they will have to account for the Pack's income and expenses on their annual returns whether you have a separate bank account or not. That can easily be accomplished by a 1/2 hour or less meeting of the Pack's Treasurer and the PTO's Treasurer once a year.

 

If you do get your own EIN, remember that you will have to religiously file an annual tax return - even if (and it always should be)the taxes are Zero. The IRS has been fairly lenient about that in the past - but they are cracking down now to make sure every non-profit with an EIN files a tax return. If you forget to file a tax return and are still collecting money as a non-profit under that EIN, the Pack could be subject to a fine for failure to file. The taxes may still be zero, but you're still have a fine.

[ScoutNut]

Again, check with your council, and/or the IRS.

 

From my council Web site -

 

"In 2008 the IRS introduced a new, abbreviated filing for small tax-exempt organizations with annual gross receipt of less than $25,000: Form 990-N. The BSA national office consulted with the IRS and outside counsel about if this new filing requirement applies to Cub Scout packs, Boy Scout troops, Venturing crews, and other units. In their opinion, most Scout units do not have to file the new Form 990-N. For most units, no filing is required.

 

The only exception is for the very small number of units that have filed for separate, federal tax-exempt status under Section 501©(3) of the Internal Revenue Code. Those units must file either Form 990-N (if their annual gross receipts were less than $25,000) or the more detailed Form 990 or 990EZ (if annual gross receipts were $25,000 or more)."

 

[kmorley971]

All of the comments are very helpful.

 

So in response to CalicoPenn, if we get our own EIN for checking account does that eliminate obligation to report $ on the CO tax return? This what i would infer from the comment posted by ScoutNut?

 

I think that is what were PTA President is headed, even thoight they are willing to allow the Pack to use the EIN for purchases...seems like double standard.

 

[ScoutNut]

Why would you need an EIN to make purchases?

 

An EIN is needed for Federal taxes. That has nothing to do with your purchasing craft supplies for your Pack.

 

Are you confusing being tax-exempt for Federal Income Tax purposes, and not paying local sales tax on purchases? If so, these are two entirely separate things.

 

Edited to add - At least in many states they are two separate things. Perhaps your state, instead of using a State Sales Tax Exemption number, or certificate, uses the Federal EIN?

 

(This message has been edited by Scoutnut)

[CalicoPenn]

If you have your own EIN number, you will need to report your revenue and expenses on your own - and since it is a separate EIN number, there will be no need for the PTO to report it also.

 

 

[kmorley971]

Well our CO has denied use of their EIN based on the following points. Our CO is a PTA and they solicited input from: 1) the County Council of PTAs Treasurer, 2) the State PTA Treasurer, and 3) an outside, independent Accountant. Unanimously, they all told the CO that they could not/should not allow the Boy Scout pack to use the PTAs EIN. Therefore, we cannot allow you to use the PTAs EIN. Bottom line from the State PTA is that they cannot pass through monies for any other group, period. The County PTA Treasurer was more concerned with risk and liability, and the Accountant said it was just bad business practice, along with a serious liability to the PTA.

 

This seems like a very serious issue that will impede operations of other Scout groups and should be investigated futher by National BSA. Also any guidance on proper categories for setting up EIN (like do we need to be incorporated to get one?) would be very helpful.

 

Also by haveing our own EIN for checking account does that put a firewall between the CO and Pack funds.(This message has been edited by kmorley971)