501c3 Tax-exempt Status

Oct 18 09:01 UTC 1995

For as long as I've been on grex, people have been talking about applying
for tax-exempt status (501c3), which would allow people to deduct their
membership dues and save us from having to shell out grex's money to the
IRS.  In the most recent board meeting minutes item, it said that nothing
has been accomplished.  It also has been reported by our treasurer that
we are now big enough to be required to file tax returns.

It's time to stop shilly-shallying on this one, folks.  Let's hire someone
to do this for us, if we can't do it ourselves (and based on what's happened
the last two years, we can't).

response 2 of 43:

Oct 18 12:25 UTC 1995

Before you decide how to do this maybe you'd like to see
what it has done for M-net.  Look closely. 

response 4 of 43:

Oct 18 19:56 UTC 1995

A few others and I filled out the 1023 form for a different non-profit,
and got tax-exempt status in eight months. I am the shilly-shally-er here.
I started shilly-shallying because of a (long) argument in coop of whether
grex *should* seek 501(c)3 exemption. Eventually the board adopted a
"sense of the board" resolution that we should. I then shilly-shally-ed
waiting for information I had requested about some financial facts of the
organization (which I do not yet have). I shilly-shally-ed some more
because a nonprofit corporation does not legally have to register its
status with the IRS to be tax exempt until its income exceeds a certain
minimum (which we reach this year). Finally, I shilly-shally-ed even more
because I waste too much time having fun here instead of doing the
(volunteer) "job". If you want it done *now* it should be hired out: I'm
going to have to shilly-shally a while longer because of accumulated other
committments (in my "real life"). I can tell you, it is very easy to
shilly-shally in Grex - its the dominant way of doing business except at
extraordinary junctures where the stars are aligned, energy is focused
through the crystals, and the doers are momentarily unemployed. 

response 6 of 43:

Oct 19 04:52 UTC 1995

I think I probably voted for the "sense of the board" resolution saying we
should seek the 501(c)3 status, but that was before I saw what it did to
Arbornet.  I'm not so sure anymore.  I think we need to be very careful with
this.  It could have some great benifits, but not that many of them, and it
has some rather tight restrictions on it.  For the record, I think it was
discovered that our membership dues would not be deductable, due to the
membership perks.

response 8 of 43:

Oct 19 06:47 UTC 1995

Uh, Rane?  Where else can somebody get Internet access, even very slow
Internet access, with unlimited time for $6 per month?  I think Grex
membership would have a market value of at least that.  Besides, I think I
remember something about a letter from the IRS in response to somebody's (Mary
Remmers, maybe?) questions about whether Grex dues are tax deductable.

response 10 of 43:

Oct 19 07:51 UTC 1995

Re 2 & 6:  Fine, we don't want what happened to Arbornet to happen here,
whatever it was.  So hire a professional, someone who's filled out these
things before for other organizations and understands the law and its
implications, to help us choose how to apply and ultimately, whether to
apply at all.  Just because some other caveman got burned doesn't mean
we should avoid that fire thing.  We just need to learn how to handle it.

And Rane, I tried to explain in #1 above that I don't see this as a failing
on the part of any individual involved, but I do see it as a failure of
Cyberspace Communications as a whole, including me, and I'm trying to fix
things here.

response 12 of 43:

Oct 19 19:29 UTC 1995

Jan is correct. A problem at Arbornet at one time (I no longer follow
their activities) was that there was a conflict between those that wanted
to "sell" internet and other services to increase their income, and those
that wanted the system to be more charitable. I have not heard many voices
on Grex suggesting selling services - the discussion is rather of whether
or not our dues, which are charitable donations, somehow represent the
purchase of something, even though we have set no fees for any services. 

The argument in #8 is baseless. If we had enough members supporting Grex
with donations, because they believed in our charitable cause, we could
have no restrictions on internet access to anyone. The "value" of internet
access would therefore be zero, even if others charged something else for
it. The IRS law in this regard is almost entirely concerned with the value
of tangible goods given in exchange for membership.  All non-profits offer
their members special intangible services, such as information, access to
information sources, etc, which are not considered as tangible goods for
tax purposes. Even newsletters are not considered tangible goods (though
fancier magazines cross the line, which is ill defined). 

The cited IRS opinion was a standard "its your job to convince us"
response. Almost all applications for 501(c)3 registration of the most
clearly deserving organizations are routinely questioned or denied for
some reason for another, and your success depends primarily on your
persistence in responding to each point they raise. 

response 14 of 43:

Oct 19 22:45 UTC 1995

Today's Arbornet is the result of a merger between two different
organizations, OAFS and Arbornet.  Arbornet had obtained theri 501c3 status
before the merger, and their particular goals got wired into the application.
However most of the users of the merged system were from the Mike Myers/Dave
Parks/OAFS lineage and had significantly different ideas of what they wanted
from M-Net.  Thus as a result of the merger, the official goals of Arbornet
were quite different from the interests of 99% of the users of M-Net.  This
was one of several sources of friction that caused problems there.

There is no parallel in Grex history.  We won't put language in our
application that we aren't comfortable with, even if that was the only way
to attain 501c3 status.

response 16 of 43:

Oct 20 03:05 UTC 1995

Re #8:  I don't get slow internet access for $6/month; I get FREE access to
a number of Internet services through Grex, primarily e-mail (or will get the
other services when the Internet policy is implemented on the Sun-4).  Only
a handful of the services are limited to members, hence only the value of
THOSE services could POSSIBLY be considered in decreasing the deductibility
of dues.  

Re #6:  Also keep in mind that not all donations are dues paid by that member.
selena and someone else gave for the UPS.  I'm sure thathas happened before.

response 18 of 43:

Oct 20 05:32 UTC 1995

That sounds like a good business decision. It clarifies the respective
rights and privileges. It is similar to The Nature Conservancy, a tax
exempt, non-profit, corporation, where a membership is tax exempt and
provides no services (well, a newsletter, which does not have to be
deducted from your dues donation), while you can buy many things from
them, the profit from which also supports TNC, but the cost of purchase
is of course not deductible. It also avoids the problem Grex has in
slight measure, that it appears that the dues donation buys some
services, even though the relation is that a dues donation is a contribution
recognized with membership, which receives some small benefits. Subtle.

response 20 of 43:

Oct 21 17:04 UTC 1995

re #9:  Arbornet is a charitable organization.  The confusion to which you
        refer resulted from its having board members who weren't sufficiently
        interested in learning the meaning or significance of its 501(c)(3)
        status.

response 22 of 43:

Oct 21 23:01 UTC 1995

   And, perhaps: if we have to change, how would you engineer it?

   Thank you very much for even thinking about talking about this.
Don't worry--we'll take what you say as advisement only.

response 24 of 43:

Oct 22 17:50 UTC 1995

I am also interested in others opinions. Mine is the same as Rane's.