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Joined: 4/15/2008
Posts: 53
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Hello everyone,
Working on the tax issue for non-profit status again. I think I've got it down to three possible classifications. The choice of which one will be determined by the following question:
Do we need to ability to receive tax-deductable donations?
If the answer is yes, then we must choose 501(c)3 status. If not, then I'm looking at (c)4 or (c)6. The later give us more leeway in conducting for-profit activities and political lobbying, but I doubt we can really take advantage of those. I'm imagining that any commercial activity we have will be in the form of t-shirt sales or something similar. And we can still do that under 501(c)3. It really only depends on if we need to offer a tax-deduction as a way to generate donations. For the record, (c)4 is for social welfare organizations and there's one definition specifically for groups organized to hold an anual event for the promotion of local culture and tradition. (As Boulder has a long-standing tradition of unconventionality, and a 30? year history of kinetic sculpture racing, I think that's us.) The (c)6 classification is used primarily for trade organizations, but we might also fit in there.
Please be prepared to debate/discuss this issue at the meeting tomorrow. Also, I'm planning to have a sample-set of organizing documents for debate. If the technology allows, I'll also post them here.
Scott
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goddessjeno.blogspot.com/
Joined: 9/22/2008
Posts: 3
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Howdy,
Just from experience, folks (mainly businesses/donors/sponsors) want some accountability for their donations and a 501(c)3 status provides that. I would say 99%, if not 100% of all other races operate under a 501(c)3. If you want a major sponsor to donate, they will want you to have your 501(c)3, if you want to apply for a grant, it will be the same. Even participants and local attendees like the fact that you have that status - it gives you a certain credibility.
I am not familiar with a (c)4 or (c)6 status, so I can't offer anything towards selecting one over the other, but I would think you would want to lean towards a (c)3 - just my two cents...
Thanx, Jen-O
Goddess Jen-O
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goddessjeno.blogspot.com/
Joined: 9/22/2008
Posts: 3
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Arrgg,
I typed a response and it wouldn't post, so I'm trying again.
I am not familiar with (c)4 or (c)6 to be able to offer suggestions as to which is more appropriate. I can say that all of the races (and other organizations) I am involved with operate as a (c)3. Businesses/sponsors/donors want that accountability and it lends credibility to your event and organization. It also helps if you are going out for any grants. It even helps with the general public (the credibility thing and all) - but that is just my two cents. Good luck at your meeting.
Thanx, Jen-O
Goddess Jen-O
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Joined: 4/15/2008
Posts: 53
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The classification 501(c)6 can be ruled out. I just found the precident burried in a .pdf file on the IRS website: http://www.irs.gov/pub/irs-tege/eotopick03.pdf. 501(c)6 is designated for organizations composed of individuals, businesses, and groups for the purpose of promoting the intrests of specific lines of business. Hobbies (and hobbyists) are specifically excluded since they do not engage in business. In American Kennel Club vs. Hoey, the court found that "though the plaintiff is a league of clubs, it surely is not a league of business clubs" since its member clubs "are primarily interested in sport and not business."
So, the likely interpretation of the IRS is that we are hobbyists engaging in sport, rather that professionals engaging in business. Each of us would have to be in the business of selling kinetic sculpture, be professional artists, sell vehicles and parts, etc. to qualify under 501(c)6. And since the majority of the members don't, Kiniticists.org doesn't qualify under 501(c)6.
Onward to the minutia of 501(c)4. I'll be looking for any sort of advantage it would give us, if any.
Scott
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Joined: 4/15/2008
Posts: 53
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In yet another exhaustive .pdf, I've since found:
An organization whose purpose is to develop and encourage interest in painting, sculpture, and other art forms by conducting, in a noncommercial manner, a community art show qualifies for exemption under 501(c)4.
However, social and recreational activities themselves are not considered social welfare activities. An organization would only qualify under 501(c)4 in this capacity because it provides social welfare by promoting the arts through public means. In other words, we would need to be actively promoting Kinetics through education in building conveyances, sculpting, costume making, etc. Which means doing more than just putting on a race each year.
Borrowing a bit from the Kinetic Universe's Articles of Incorporation, thier stated purpose is: "The specific purposes for which this corporation is organized are to promote education of Artistic Human-Powered Vehicle Technology and stimulate AHPVT by encouraging and organizing competitive events. We will work towards development of AHPVT for daily transport and facilitate interchange of AHPVT between first and third world nations."
Kinetic Universe,as Jen-O pointed out, is organized as a 501(c)3. It appears that if we use a similar statement of purpose, we could qualify under either (c)3 or (c4). Both classifications require the same filing fee of $300 (if average gross receipts will be less than $10,000 for four years.) So it appears the the real distinction between (c3) status and (c4) status is that (c3) allows tax deductable donations, but not for-profit related business or political lobbying. (c4) allows substantial for-profit related business activities and political lobbying but not tax-deductible donations.
Since Kineticists.org will not be a business and will not conduct any sort of for-profit commercial activity, nor will we engage in organized political lobbying, I do not believe that there is an advantage for us in organizing as a 501(c)4. The filing fee is exactly the same so we don't save any money. Furthermore, we know from Jen-O's previous posts and Kinetic Universe's status that 501(c)3 will work. If we structure our Articles of Incorporation, by-laws, and statements of purpose in a similar fashion to what has been proven to work, we stand a very good chance of suceeding without undue hassle from the IRS. And once that's out of the way, we can concentrate on the event.
If anyone knows something that I missed, please be prepared to discuss at the meeting tomorrow, or post a response with specifics for me to research.
Thanks,
Scott
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JonathanSterner.com
Joined: 3/16/2008
Posts: 56
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Excellent discussion and work researching the Tax information Scott. Your dedication to read the tax code and research the right solutions for our purpose is very much appreciated and valued. Jen-O I really do love your invaluable perspective sharing your years of experience of running the race in CA.
Scott given the information listed in your postings above, I feel that the solution is clear. The 501(c)3 status is the best fit for our organization.
Jen-O I have been working on a solution for the technical issues when making postings to our site. I believe my anti virus is prohibiting the page reload when people make a posting. I am going to research the issue and hopefully I find the fix soon. I have found a workaround to the issue. Once you click the Submit link click on any other navigation button go back to the forum you will see you posting has worked.
See you all at the meeting,
Jonathan Sterner
Jonathan Sterner
http://JonathanSterner.com
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Joined: 3/16/2008
Posts: 8
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Scott I have added a Documents tool at top of the Kineticists community page. I have also set it up so only users will need to be login to access the files.
Give it a try uploading a document,
Jonathan Sterner
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