discuss: Thread: Should LDP apply for non-profit status (was Re: VolunteerMatch ...)

On Mon, Apr 16, 2007 at 05:24:45PM -0700, David Lawyer wrote:
Re Volunteer Match
> They use the EIN to check to see if you are actually a non-profit
> under section 501c of the IRS code.  LDP isn't, so there is thus no
> point in filling out the application on the Internet for
> VolunteerMatch.  Thus there's no point at this time for getting an EIN
> number (unless we want to open an investment account so as to get
> interest on our $).  Perhaps we should get 501c status but the IRS
> says that you have to be either a corporation, trust, etc. to do so.
> Perhaps LDP should incorporate.

I'm sure I read the above and thought it was from the IRS.  I've just
Googled and found another statement that one needs to be incorporated
to get tax-exempt status from the IRS.   But I also checked a detailed
publication by the IRS about getting tax exempt status (501c, etc.).
It seems that you don't really need to be incorporated but you must
have an "organizing document" which might be our Manifesto.  IRS says
that by-laws are not an organizing document by themselves (another
document is needed).  So it seems that it might be possible to get
tax-exempt status without incorporating.

It costs $300 to apply and if there is something wrong, the IRS gives
you a few weeks to fix it.  So if they rejected our Manifesto they
would need to say why and give us a chance to revise it.  And I think
they would likely give us a second chance to revise the revision if
that proved necessary.  I think that they want the organizing
documents to assure that the assets of LDP will not be used for
non-exempt purposes, including what happens to the assets if LDP were
to fail.  In other words, the Manifesto would need to be revised to be
something like the "articles of incorporation" for a non-profit
corporation but the legalese in such articles is at odds with the
informal style of the Manifesto.

So the first step, if we want to try to get tax-exempt status without
formally incorporating, is to revise the Manifesto to be more like a
"constitution".  I'm willing to try this and I think that we should
continue with the informal style and revise it to the point where it's
barely acceptable to the IRS.

We are pretty good on other requirements for being a non-profit as I
think that some non-profits have ulterior motives of putting profits
into high pay of key employees so as to appear to be nonprofit, while
they are actually making a profit.  We don't have that problem.

			David Lawyer

simple question - who will be the president? :d

s.

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On Tue, 17 Apr 2007, Sergiusz Pawlowicz wrote:

> simple question - who will be the president? :d

Since you ask: you? :)

Tille.

- --
Machtelt Garrels                ####@####.####
Review Coordinator    	 	http://www.tldp.org/authors/

My Penguin, my freedom.         http://tille.xalasys.com

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Quoting David Lawyer ####@####.####

> I'm sure I read the above and thought it was from the IRS.  I've just
> Googled and found another statement that one needs to be incorporated
> to get tax-exempt status from the IRS.   But I also checked a detailed
> publication by the IRS about getting tax exempt status (501c, etc.).
> It seems that you don't really need to be incorporated but you must
> have an "organizing document" which might be our Manifesto.

Once again, there are _many_ categories of USA-tax-exempt non-profit
organisation defined in Internal Revenue Code section 501(c), and each
has its own regulatory requirements.  The category you are likely
thinking of is 501(c)(3) -- charities.  Quoting IRS Publication 557
("Tax-Exempt Status for Your Organization") as to its wording about
501(c)(3) charities:

   To qualify, the organization must be a corporation, community 
   chest, fund, or foundation. A trust is a fund or foundation 
   and will qualify.  However, an individual or a partnership will not
   qualify. 

If you want to deal intelligently with these matters, read and
comprehend IRS Publication 557.  (Please note the reasons why
applications for _any_ of the 501(c) categories are pretty nearly
pointless unless your non-profit organisation brings in over US $25,000
per year in revenues.  Make sure you understand the annual reporting
requirements.)

> So it seems that it might be possible to get tax-exempt status without
> incorporating.

My vague recollection is that the _other_ categories, aside from
charities, do not require incorporation or a similar type of
organisational vehicle.  However, Publication 557 has details.

On Tue, Apr 17, 2007 at 04:48:34PM +0100, Sergiusz Pawlowicz wrote:
> simple question - who will be the president? :d

If you incorporate, then you need a president plus a couple of other
officers like a treasurer.  But I'm only proposing getting a
tax-exempt status from the IRS without incorporating.  So I don't
think we need a president although at least 2 people need to sign the
Manifesto.   On the Internet, one can find unincorporated non-profits
that have obtained tax-exempt status from the IRS.  For example:
A tennis club in Texas, USA is like this and Texas law has an act
which covers unincorporated non-profits.  Here's an excepts from their
(Austin Tennis Club) "constitution":

   ARTICLE IV - ASSOCIATION NOT FOR PROFIT

     Section 1. This Association shall conduct its affairs and all its
     projects in such a manner that it will qualify as an unincorporated
     nonprofit association as that is defined in the Texas Uniform
     Unincorporated Nonprofit Association Act (art. 1396-70.01, Texas
     Civil Statutes).

     Section 2. This Association shall conduct its affairs as a tax-exempt
     recreational club as that term is defined in Section
     501 (c) (7) of the Internal Revenue Code.

Of course we are not recreational but charitable and educational.  We
are charitable because we give away our docs on the Internet.  We are
educational because this documentation teaches people about Linux.
And IRS grants tax-exempt status to either charitable or educational
organizations.  I'll need to check the status of unincorporated
nonprofit associations in California where I live but I reported
before that members of such Califonia organizations are exempt from
being sued just because they are members.

It may be that Texas would be the best place to register as an
inincorporated association, but then we would need an address in
Texas.

			David Lawyer

Quoting David Lawyer ####@####.####

> We are charitable because we give away our docs on the Internet. 

Non sequitur.  You really badly need to read Publication 557.

Please, David, do LDP the favour of understanding terms used in tax law
in the correct context, before risking acting on misconceptions.

> I'll need to check the status of unincorporated nonprofit associations
> in California where I live but I reported before that members of such
> Califonia organizations are exempt from being sued just because they
> are members.

Please cite the statute or caselaw.  I believe your statement is
extremely overbroad and vague, as phrased.

On Tue, Apr 17, 2007 at 02:32:42PM -0700, Rick Moen wrote:
> Quoting David Lawyer ####@####.####
> 
> > We are charitable because we give away our docs on the Internet. 
> 
> Non sequitur.  You really badly need to read Publication 557.
I've read it and you're right that it doesn't classify us as charitable
by giving away stuff but by public benefit.
> 
> Please, David, do LDP the favour of understanding terms used in tax law
> in the correct context, before risking acting on misconceptions.

OK, I did post stuff when I hadn't completely investigated.  Sorry.
Right now it seems that we likely qualify for tax exemption as either
charitable and/or educational except that for charitable it says you
must be incorporated (like you posted).  I haven't found such a statement for
educational but it might exist.  But I'm holding back from acting
until I've fully investigated the situation: like getting an EIN that
would have done us no good by itself with VolunteerMatch.

> 
> > I'll need to check the status of unincorporated nonprofit associations
> > in California where I live but I reported before that members of such
> > California organizations are exempt from being sued just because they
> > are members.
> 
> Please cite the statute or caselaw.  I believe your statement is
> extremely overbroad and vague, as phrased.

The problem is that I read this from a legislative committee report
and this report failed to cite anything.  You're right of course that
to clarify this I should cite the statute or caselaw and expand on
what the law does.  There are apparently both exemptions of member
liability from tort and contracts which implies that an unincorporated
organization can enter into contracts.  So I plan to look into this some
more and produce citations.  But first I want to know if LDP is
interested in pursuing this.  If not, a lot of my time would be wasted
on this research.
			David Lawyer

Quoting David Lawyer ####@####.####

> I've read it and you're right that it doesn't classify us as charitable
> by giving away stuff but by public benefit.

Please read _all_ of the requirements.

> OK, I did post stuff when I hadn't completely investigated.  Sorry.
> Right now it seems that we likely qualify for tax exemption as either
> charitable and/or educational except that for charitable it says you
> must be incorporated (like you posted).  

Seriously, please do carefully read Publication 557
(http://www.irs.gov/pub/irs-pdf/p557.pdf), and other IRS resources such as 
http://www.irs.gov/charities/charitable/article/0,,id=96099,00.html .

501(c)(3) charitable status _includes_ educational groups (along with
conventional charitable, religious, scientific, literary, testing for
public safety, fostering national or international amateur sports
competition, and the preventing cruelty to children or animals groups.

(I'm a little  worried that you might fall directly into many of the
exact pitfalls I warned against in the User Group HOWTO.)



> The problem is that I read this from a legislative committee report
> and this report failed to cite anything.  You're right of course that
> to clarify this I should cite the statute or caselaw and expand on
> what the law does.  There are apparently both exemptions of member
> liability from tort and contracts which implies that an unincorporated
> organization can enter into contracts.

Why do so many computerists go around maintaining that unincorporated
associations cannot enter into contracts?  Have they never encountered a
local Boy Scout troop?  Scoutmasters and other volunteers who comprise
such troops (and the parents of the scouts) enter into contracts all the
time, in the same ways that anyone else does.   That is, they enter into
contracts through their participants doing so.

Please read this thread, where I try to straighten out Silicon Valley
Linux User Group's tendency to fall into those same sets of pitfalls,
having been lead into it by a local ham radio group that keeps promoting
misconceptions on such matters:

http://lists.svlug.org/archives/volunteers/2007q1/000120.html

Anyway, as it happens, I've researched both Federal and California
(e.g., Civil code section 1714.2) legislative liability shields of
volunteers.  None I've found is really worth a damn in the usual
circumstances that concern computerists, once you study the particulars.
(The oft-cited Federal one is dissected in the referenced thread.)

Quoting Rahul Sundaram ####@####.####

> There is possibly a easier way out for LDP.  Take a look at 
> http://conservancy.softwarefreedom.org/

Appears to be well thought out, and run by reliable people.

Rick Moen wrote:
> Why do so many computerists go around maintaining that unincorporated
> associations cannot enter into contracts?  Have they never encountered a
> local Boy Scout troop?  Scoutmasters and other volunteers who comprise
> such troops (and the parents of the scouts) enter into contracts all the
> time, in the same ways that anyone else does.   That is, they enter into
> contracts through their participants doing so.

1. Technically speaking, Boy Scout Troops are *programs* chartered to a
legal entity, such as a church, school, or in some rare cases even a
private company. Any contracts entered by the troop are on behalf of the
chartering organization. All property and assets of the Troop actually
belong to the chartering organization.

2. If you want to know how to properly form a new organization, pick up
a copy of Robert's Rules from your local book store ($5-$10).

3. Social clubs and such are recognized under tax law and carry no form
of incorporation.

4. Generally, a president, treasurer, and secretary are desirable for
any organization seeking legal recognition.

~Bradley