Did the San Francisco Educational Fund qualify as a PTA-equivalent organization under section 6370?

Plain-English summary

Counsel asked California to treat a redacted educational fund as equivalent to a PTA under section 6370. The official live annotation identifies it as the San Francisco Educational Fund; that name remains redacted in the supporting opinion. The request was dated February 15, 1989, with supplemental material supplied April 7.

Section 6370 required an equivalent organization to provide the same type of service for public and private schools as PTAs and to be authorized within a school by its governing authority. Counsel had quoted conditions from the March 1987 Pamphlet No. 18, Volunteer and NonProfit Fund Raising Organizations; the Board said they were unchanged in an April 1988 edition enclosed with the response but absent from the published PDF.

Tax Counsel Gordon P. Adelman compared the Fund to California PTA Bylaws. Article II addressed child and youth welfare, home life, protective laws, home-school cooperation, and educational advantages, promoted through programs for parents, teachers, and the public. Quoted Article III required noncommercial, nonsectarian, nonpartisan operation and work with schools while recognizing boards of education as legal decision-makers.

Equivalency did not require identical objectives or every PTA service. At minimum, the opinion expected a nonprofit including parents, students, and teachers with objectives coordinating educational programs or projects among those groups, school authorities, and the public.

The submitted IRS section 501(c)(3) and California Franchise Tax Board section 23701d letters established nonprofit status. The board included parents of public- and private-school children plus community members. Submitted projects involved teachers and parents. A redacted catalog described projects for varied student groups, indicating objectives to enhance all students' welfare and improve parent-school-authority communication. Small grants brought together parents, teachers, and community resources.

Two redacted education bodies specifically authorized every grantmaking activity, followed by approval from authorities at each implementing school. Article VII of the Articles of Incorporation barred member distributions of gains, profits, or dividends and irrevocably dedicated property, assets, profits, and net income to Fund purposes.

Based on that submitted information, counsel said the Fund appeared to meet the minimum and qualify as equivalent under section 6370. It therefore was consumer rather than retailer of tangible personal property sold in its fundraising activities.

Source and live-annotation limits

The official PDF does not include the February 15 request, April 7 supplement, March 1987 or April 1988 Pamphlet 18, IRS or Franchise Tax Board exemption letters, governing or board records, project literature or redacted catalog, grant applications or awards, parent, student, teacher or community participation records, approval records from either named body or implementing schools, Articles of Incorporation, fundraiser records, property, sellers or buyers, profit-use records, invoices, sales or uses, returns, exemption documentation, tax calculations or payments, audit, assessment, claim, appeal, or later outcome. Counsel, the Fund, board members, schools, students, parents, teachers, community participants, approving bodies, projects, transactions, quantities, prices, grants, profits, and tax amounts are redacted, unidentified, or undocumented.

The source says the organization has adopted objectives which coordinated promotion; the original-text section preserves that published grammar rather than silently rewriting it.

The live annotation supplies the San Francisco Educational Fund name and states its section 501(c)(3) status. The supporting opinion redacts the name and attributes that status to an absent IRS letter. The live annotation preserves the California PTA Bylaws comparison, minimum-requirements conclusion, section 6370, date, and consumer result. It omits the request, supplement and counsel, section 6370's school-service and authorization conditions, both Pamphlet 18 editions, exact PTA objectives and policies, minimum constituency and coordination standard, California section 23701d letter, board composition, parent and teacher projects, catalog and varied students, student-welfare and communication objectives, small grants, three approval levels, Article VII dedication, appears wording, missing records and enclosures, redactions and source grammar, and absent outcome.

What this means for you

Educational funds, schools, nonprofits, and tax professionals

Preserve exemption letters, governing and board records, parent, student, teacher and community participation, project descriptions and grants, approval from district-level and implementing-school authorities, Fund literature, assets and profit dedication, every fundraiser and property sale, invoices, returns, exemption documents, tax calculations, and payments. Nonprofit status alone is only one part of the equivalency analysis.

Common questions

Did the Fund have to duplicate every PTA objective?

No.

What facts supported equivalency?

Its nonprofit status, parent and community participation, coordinated grant projects, and school-authority approvals.

How was it treated for fundraising property sales?

As the consumer rather than the retailer.

How were projects approved?

Two redacted education bodies approved every grant activity, then authorities at the implementing school also had to approve it.

What did Article VII provide?

No gains, profits, or dividends to members and irrevocable dedication of property, assets, profits, and net income to Fund purposes.

Did the source include the exemption letters or project catalog?

No.

Did the opinion document a fundraising sale?

No.

Citations and references

• California Revenue and Taxation Code § 6370
• California Revenue and Taxation Code § 23701d
• Internal Revenue Code § 501(c)(3)
• Pamphlet No. 18, Volunteer and NonProfit Fund Raising Organizations (March 1987 and April 1988 editions)
• California PTA Bylaws, Articles II and III
• February 15 request and April 7 supplement; exemption letters, Fund literature and catalog, Articles of Incorporation, project approvals, sales and tax records; and outcome — described or implicated but not documented

Verbatim support

From the official Tax Counsel opinion:

The small grant projects appear to bring together parent participation, teacher involvement and community resources.

All property, assets, profits and net income of the Fund are irrevocably dedicated to its purposes.

Accordingly, the Fund is a consumer of, and not a retailer of, tangible personal property which it sells in connection with its fund-raising activities.

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/390-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/390-0097-900.pdf

Original ruling text

390.0097.900

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-2705

April 25, 1989

Ms. J--- T. S--Law Offices of
H--- R--- N---C--R--- & F----- --- Circle, --- Floor
--- ---, CA XXXXX
Dear Ms. S---:
This is in response to your letter of February 15, 1989 and supplemental material you furnished on April 7, 1989. You are requesting that the S--- F--- E--- Fund (Fund) be qualified as a parent-teacher association (PTA) equivalent organization under Revenue and Taxation Code section 6370. Section 6370 requires that an organization in order to be considered equivalent must perform the same type of service for public and private schools as parent-teacher associations and must be authorized to operate within the school by the governing authority of the school. Certain conditions must be met before an organization qualifies. Those conditions which you quoted from State Board of Equalization Pamphlet No. 18, “Volunteer and NonProfit Fund Raising Organizations,” published in March 1987 are unchanged in the updated April 1988 edition, a copy of which is enclosed for your information. In order to determine whether a particular organization meets the prerequisites to qualify as a PTA equivalent, the organization must provide the same type of service. It is therefore helpful to compare the objectives and services offered by that organization with the objectives and services offered by the P.T.A. For this purpose, pertinent excerpts from the California P.T.A. Bylaws become relevant. Article II, Section I, lists the objectives of the PTA as follows: “a.

To promote the welfare of children and youth in home, school, church and community.

“b.

To raise the standards of home life.

Ms. J--- T. S---

-2-

April 25, 1989
390.0097.900

“c.

To secure adequate laws for the care and protection of children and youth.

“d.

To bring into closer relation the home and school, that parents and teachers may cooperate intelligently in the education of children and youth.

“e.

To develop between educators and the general public such united efforts as will secure for all children and youth the highest advantages in physical, mental, social, and spiritual education.”

Article II, Section 2, indicates that the objectives will be promoted by the following: “The objects of the National PTA and the California State PTA are promoted through an educational program directed towards parents, teachers, and the general public; are developed through conferences, committees, projects and programs; and are governed and qualified by the basic policies set forth in Article III.” Insofar as is pertinent here, Article III provides: “a. The organization shall be noncommercial, nonsectarian, and nonpartisan
*

*

*

*

*

“d.
The organization shall work with the schools to provide
quality education for all children and youth and shall seek to participate in the decision-making process establishing school policy, recognizing that the legal responsibility to make decisions has been delegated by the people to boards of education.” It is not necessary that an organization have identical objectives and provide all of the services outlined above in order to be considered equivalent. However, it should be a nonprofit organization which includes parents, students and teachers and has adopted objectives which coordinated promotion of educational programs or projects among parents, students, teachers, school authorities and the general public. In your comprehensive letter of February 15, you provided copies of the Internal Revenue Service letter granting the Fund exempt status under section 501(c)(3), Internal Revenue Code, and a letter from the California Franchise Tax Board granting the Fund exempt status under section 23701d, Revenue and Taxation Code. Thus your nonprofit status has been established.

Ms. J--- T. S---

-3-

April 25, 1989
390.0097.900

The composition of the Fund’s Board of Directors includes parents of both public and private school children and other community members. The projects described in your letter and in the literature you provided include projects conducted by teachers and by parents. Your “Catalog of P--- C--- by T---” describes each project and its availability to varied and diverse student groups and is indicative of the Fund’s objectives to enhance the welfare of all students and develop better communications between parents and school authorities. The small grant projects appear to bring together parent participation, teacher involvement and community resources. All of the Fund’s grantmaking activities are specifically authorized by the S--- F--- Board of E--- and the U--- S--- D--- of S--- F---, and after review and approval by these two bodies, the authorities at the school where the project is to be implemented must also approve the project. Article VII of the Articles of Incorporation is explicit in the Fund is not organized for profit and no “distribution of gains, profits or dividends” will go “to the members thereof”. All property, assets, profits and net income of the Fund are irrevocably dedicated to its purposes. Based upon the information submitted by you, the S--- F--- E--- Fund, as described, appears to qualify as an “equivalent organization” under Revenue and Taxation Code section 6370 since the organization meets the minimum requirements set forth above. Accordingly, the Fund is a consumer of, and not a retailer of, tangible personal property which it sells in connection with its fund-raising activities. If you have any further questions regarding this opinion, please do not hesitate to contact us. Very truly yours,

Gordon P. Adelman
Tax Counsel

GPA:sr
cc:

Mr. E. L. Sorensen, Jr.