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Re: [AmateurRadioLeadership] 501c3 Status?

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  • Ed Greany
    Good point Andrew. You have to file for non-profit status with your state AND the IRS.   Ed ________________________________ From: andrew@siliconcreek.net
    Message 1 of 3 , Jul 2, 2012
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      Good point Andrew.
      You have to file for non-profit status with your state AND the IRS.
       
      Ed

      From: "andrew@..." <andrew@...>
      To: AmateurRadioLeadership@yahoogroups.com
      Sent: Monday, July 2, 2012 11:58 AM
      Subject: RE: [AmateurRadioLeadership] 501c3 Status?

       
      This can be a state issue.  

      This pre-dates me, but our club nearly got into hot water because of something (raffle tickets or scratch-offs or something that we don't even do anymore) that we could not legally sell without 501c3 status, and it got into how hamfest tickets were being used as a raffle item (because we drew door prizes from them and did not limit purchasers to one or something of that nature).  Being a 501c3 allows us to legally do a lot of things that we normally do, we did, and somehow got caught doing.  Note that if you're not 501c3, in the eyes of the IRS you are not a not-for-profit agency, even though many clubs would (rightfully) consider themselves that.  Note that if someone contacts the state over it, they put you through the ringer and check everything.

      We had help from a CPA that is a friend of a club member.  I believe we paid the CPA for that, and I know we paid the CPA for tax help this past year and we likely will in the future.

      On the donations, we have had donations, but having only been 501c3 for just over a year, it is too early to tell how that will go moving forward.

      tl;dr: check your state laws to see if you need it, be prepared to pay for help with the paperwork and yearly for filing taxes. 

      73!
      AC8JO
      Andrew


      -------- Original Message --------
      Subject: [AmateurRadioLeadership] 501c3 Status?
      From: "danromanchik" <cwgeek@...>
      Date: Mon, July 02, 2012 2:26 pm
      To: AmateurRadioLeadership@yahoogroups.com

       
      A ham e-mail me today:

      "Somewhere, I recently read about attaining a non-profit status for a radio club. I don't think that it was your blog, but I can't think of anywhere else that might have covered the subject.

      But, do you have any advice or direction on the subject? Our club has been in existence for almost forty years, and I've been here for twenty-five and have been treasurer for twenty. From time to time, I've looked at the IRS forms, but they are beyond me. I'm not a lawyer or accountant, and our small club doesn't have anyone who is savvy about such matters.

      I'm sure that there must be a lot of little clubs out there with the same situation. Do you know how they are handling finances and insurance?

      You're a great thinker, and I enjoy the blog. Thanks for making it happen."

      I replied:

      "Well, I don't really know about being a great thinker, but my take on this is that amateur radio clubs rarely ever need 501c3 status. As far as I can tell, the only benefit is that it may encourage people to donate money or equipment to your club, as the 501c3 status will then allow them to deduct the value of that donation as a charitable donation. I don't know the situation with your club, but for our club, which has had 501c3 status for many years, this doesn't even occur once per year, and my guess is that most of the donations would have been made even if we didn't have 501c3 status.

      501c3 status was designed for what I call "real nonprofit corporations," organizations such as the Red Cross, private schools, and various foundations. These corporations not only have a board of directors, but a paid staff, and a real mission to serve the community. More often than not, these organizations are head and shoulders above most amateur radio clubs."

      Am I missing something?

      73, Dan KB6NU



    • Richards
      On 7/2/2012 2:58 PM, andrew@siliconcreek.net wrote: Note that if you re not 501c3, in the eyes of the IRS you are ... This does not equal my experience in such
      Message 2 of 3 , Jul 3, 2012
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        On 7/2/2012 2:58 PM, andrew@... wrote:

        Note that if you're not 501c3, in the eyes of the IRS you are
        > not a not-for-profit agency, even though many clubs would (rightfully)
        > consider themselves that. Note that if someone contacts the state over
        > it, they put you through the ringer and check everything.


        This does not equal my experience in such
        cases. You cannot just "consider" your
        club a not-for-profit entity - it becomes
        that because you have formally organized under
        State laws that provide for it, and govern how
        it works. The IRS will honor that... PROVIDED
        you operate the organization as it should be,
        and do not exceed the limitations set forth in
        the tax laws. You CAN formally organize as a
        not-for-profit corporation, and STILL PAY TAX
        if you exceed those limitations. You can do
        that even if you are a 501(C)(3) "tax exempt"
        entity under the Federal tax laws. You CAN
        even be taxed by STATE taxing authorities even
        if your are a 501(C)(3) "tax exempt" entity
        under the Federal tax laws. STATE and FEDERAL
        tax exemptions may operate differently. The
        different states all have different tax laws,
        which can vary from the Federal tax laws.

        Remember... We are not just talking about
        income tax deductions and credits from
        donations.

        One benefit is that not-for-profit corporations
        MAY ( in some States and in some cases) be
        exempt from paying State sales tax and some
        other transaction taxes... but remember, State
        tax and corporation laws may engender a different
        result from what the Federal tax laws provide.

        In some cases, donation of used property and
        equipment could manifest a income taxable event
        for the donor. Research the matter of
        "depreciation recaptured" - it is conceivable
        a business entity, which includes an individual
        doing business, or individuals in business as
        a partnership or other legal construct - such that
        the business may have to pay income tax on
        recaptured depreciation before it can make a
        tax free donation to your club. It can get
        dicey and complicated.

        Corporations in most states must pay fees to
        file incorporation documents. This topic also
        involves State and local property taxes,
        State and (sometimes) local property sales
        and transaction taxes, local licensing
        fees. (Some smaller municipalities around
        here require corporations and LLCs to
        "register" with the City - typically a
        $25 - $35 fee - and while this seems small
        enough, all these little nominal fees can
        add up to real money after all the checks
        are cashed.

        THIS ENTAILS A LOT MORE THAN GIVING YOUR
        DONORS A LITTLE TAX BREAK AS AN INDUCEMENT
        TO MAKE THE DONATION.

        I have no idea what is mean by the phrase:
        "they put you through the ringer and
        check everything" - it would be helpful if we
        knew who "they" are, and what going "through
        the ringer" might mean. I am not being critical,
        just saying I don't know what exactly that
        refers to. It could be something substantial,
        but this is too vague to say either way. I
        found in practice, that sometimes this is
        a long story made short, and the long story
        is the whole story and matters most. But
        without more, it is not a very useful bit.



        > We had help from a CPA that is a friend of a club member. I believe we
        > paid the CPA for that, and I know we paid the CPA for tax help this past
        > year and we likely will in the future.


        Typically, a CPA is sufficiently informed, but
        in fact, a CPA is not in all cases empowered to
        prepare and file formal legal documents, such
        as are necessary to form a corporation or LLC,
        and you may want to add a qualified lawyer to
        the advisory team, along with a licensed and
        certified underwriter (i.e., higher trained
        insurance agent.)



        > On the donations, we have had donations, but having only been 501c3 for
        > just over a year, it is too early to tell how that will go moving forward.


        Remember the tax exempt status provided under
        501(C)(c) is really for the benefit of the
        donor, but not all donors can realize a
        tax savings in all cases. Moreover, the
        tax laws are funny, and part of a donation might
        be tax free, while other parts may not, and
        also, if you provide benefits or payments, either
        in cash or in kind in exchange or as part of the
        donation transaction, this can cause a part tax
        and part tax-exempt situation. I am sure there
        are some nice pamphlets on this floating around
        and it would behoove any club interested in this
        to read up A LOT. If there is a DUMMIES book
        on it - get it.




        > tl;dr: check your state laws to see if you need it, be prepared to pay
        > for help with the paperwork and yearly for filing taxes.

        Good advice here. Too bad, the cost of
        qualified tax and legal advice may exceed
        the value of any tax savings - and possibly
        the value of any equipment donated to the
        club !


        Just MY take... ymmv.

        ================== K8JHR =======================
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