This goal of this item is to work on preparing an application for 501(c)3
status for Grex.
There was a concensus a few months ago that we did, in fact, want to apply
for 501(c)3 status, which would allow people who donate money to Grex to
write it off of their taxes. If anyone wants to discuss not going for
501(c)3, please start a new item for that discussion. I want to use this
item for the mechanics of getting the application filled out in a way that
is (1) likely to get approved, and (2) accurately describes what Grex really
is and really wants to be, so that we don't corner ourselves into any mission
that we aren't actually committed to already.
To get 501(c)3 status, we need to fill out IRS form 1023, and get it approved.
I understand 501(c)3 status is very often denied on the first try and has to
be appealed. The form is nine pages long, plus various attachments are
required. If anyone wants the form and instructions, they can be downloaded
from the IRS's web page.
My proposal is that we first work on-line to discuss the general strategy we
want to take, and work out the narrative parts, and then a group consisting
of at least me (I've volunteered to coordinate this project) and Mark Conger
(we need lots of financial information) plus whoever else wants to help get
together to work out the final application. The final form would be approved
by the board before being submitted.
The Form 1023 instructions include a list of "activity codes" that are
eligable for 501(c)3 status. You are supposed to choose up to three that
best describe your organization's tax-exempt purposes and list them in order
of importance. I've chosen the two marked with "#1" and "#2" in the vastly
reduced list below (I'm just including enough to give a sense of the list):
Religious Activities.
003 Religious order
007 Evangelism
Schools, Colleges, and Related Activites.
030 School, College, Trade School, etc.
032 Nursury School
045 Student Operated Business
Cultural, Historical or Other Educational Activities
060 Museum, zoo, planetarium, etc.
061 Library
065 Fair
088 Community Theatrical Group
092 Literary Activities
093 Cultural Exchange with foreign countries
Other Instructional and Training Activities" section)
120 Publishing Activites
121 Radio or television broadcasting
122 Producing films
#1 123 Discussion groups, forums, panels, lectures, etc.
124 Study and research (nonscientific)
125 Giving information or opinion (see Advocacy)
126 Apprentice Training
149 Other instruction and training
Health Services and Related Areas
150 Hospital
166 Mental health care
Scientific Research Activities
180 Contract or sponsored research for industry
181 Scientific research for government
Business and Professional Organizations
207 Industry trade shows
208 Convention displays
213 Tourist Bureau
Farming and Related Activites
233 Horticultural Group
237 Breeders association
Mutual Organizations
251 Credit Union
Employee or Membership Benefit Organizations
260 Fraternal beneficiary society, order or association
269 Vacation benefits
Sports, Athletic, Recreational and Social Activities
280 Country club
281 Hobby club
282 Dinner club
283 Variety club
285 Women's club
296 Community center
297 Community recreational facilities (park, playground, etc)
319 Other social activities
Youth Activities
320 Boy Schouts, Girl Scouts, etc.
325 Camp
328 Combat juvenile delinquency
349 Other youth organization or activities
Conservation, Environmental and Beautification Activites
350 Preservation of natural resources
356 Garden club
Housing activities
380 Low-income housing
Inner City or Community Activities
400 Area development, redevelopment, or renewal
404 Community promotion
406 Crime prevention
407 Volunteer fireman's organization or auxiliary
408 Community service organization
429 Other inner city or community benefit activities
Civil Rights Activities
430 Defense of human and civil rights
431 Elimination of prejudice and descrimination (race, religion, sex,
national origin, etc).
432 Lessen neighborhood tensions
Litigation and Political Activities
460 Public interest litigation activities
463 Providing bail
Legislative and Political Activities
480 Propose, support, or oppose legislation
481 Voter information on issues of candidates
482 Voter education (mechanics of registering, voting etc).
483 Support, oppose, or rate political candidates
484 Provide facilities or services for political campaign activities.
Advocacy -- attempt to influence public opinion concerning:
510 Firearm control
514 Government spending
515 Taxes or tax exemption
516 Separation of church and state
520 Pacifism or peace
529 Ecology or conservation
535 Racial integration
539 Prohibition of erotica
543 Legalized abortion
559 Other matters
Other Activities Directed to Individuals
#2 560 Supplying money, goods, or services to the poor
561 Gifts or gants to individuals (other than scholarships)
563 Marriage conseling
564 Family planning
566 Job training, counseling, or assistance
568 Vocational counseling
569 Referral service (social agencies)
572 Rehabilitating convicts or ex-convicts
574 Day care center
575 Services of the aged
Activities Directed to other organizations
600 Community Chest, United Way, etc.
601 Booster club
602 Gifts, grants, loans to organizations
603 Nonfinacial services or facilities to other organizations
Other Purposes or Activites
900 Cemetary or burial activities
908 Patriotic activities
913 Prevention of cruelty to animals
927 Fundraising
I think #1 does an OK job of describing the educational side of our mission,
creating forums for public discussion. It's comforting that it is in the
same catagory with public broadcasting. #2 captues the charitable, "giving
away internet service to people who might not otherwise be able to afford it"
part of our mission. Neither is an exact fit, but we can't hope for an
exact fit in any list. We aren't that normal.
138 responses total.
We are required to include copies of our articles of incorporation and bylaws with the application. I think our bylaws are fine. They say things like "The Corporation is organized for such charitable and educational purposes as may qualify it for exemption from the federal income tax under Section 501(c)3 of the Internal Revenue Code of 1986 [...]. More specifically, such purposes include, but are not limited to, the advancement of public education and scientific endeavor through interaction with computers, and humans via computers, using computer conferencing. Further purposes include the exchange of scientific and technical information about the various aspects of computer science, such as operating systems, computer networks, and computer programming." That's a little weird, but the explicit statement that Grex is limited to doing things allowed under 501(c)3 law is what the IRS wants to see in our articles of incorporation. (By the way, if there are still people who thing Grex shouldn't be 501(c)3 around, article 6, section 3 of our articles of incorporation already binds us to obey the 501(c)3 rules and has since Grex's founding). I'm less satisfied with the bylaws. The PREAMBLE says: It is the objective of this organization to provided an open-access computer conferencing system for the education, intellectual enrichment, and entertainment of its users through the peaceable interchange of information and ideas. To this end, we establish these bylaws for the governance of the organization. I'd prefer to see at least a nod to Grex's charitable mission in that. Somethign about provide free or low-cost services. Luckily, bylaws are easily changed.
More notes on this later. Time to eat.
Couple notes. I think that we should consider doing a pass through Grex's bylaws to make various changes that will have no particular effect on how Grex is run. I've heard lots of people complain about wording, and I think the statement of purpose could more completely reflect our goals. It would be nice to be able to bundle up a lot of these cosmetic and hopefully non-controversial changes and pass them in one vote. I don't think this is necessary for the 501(c)3 project, but it would be nice. Also, I am under the impression that various other organizations had offered or even given Grex copies of their 501(c)3 applications for us to use as a partial template. I, however, haven't seen any, and I would kind of like to. If anyone knows where we can get something along those lines, I would find it helpful.
The big narrative chunk of the application starts on page two of the form.
It says:
Part II Activities and Operational Information
1. Provide a detailed narrative description of all the activities of the
organization--past, present, and planned. DO NOT MERELY REFER TO OR
REPEAT THE LANGUAGE IN THE ORGANIZATIONAL DOCUMENT. List each activity
separately in the order of importance based on the relative time and
other resources devoted to the activity. Indicate the percentage of
time for each activity. Each description should include, as a
minimum, the following (a) a detailed description of the activity
including its purpose and how each activity furthers your exempt
purpose; (b) when the activity was or will be initiated; and (c) where
and by whome the activity will be conducted.
Here is a first draft of a narrative describing our activities. I think it
still needs a lot of work, including being more explicit about hitting the
points they asked for in the question above. I need to be clearer about
planned activities, if only by saying we plan to stay on much the same course.
I think the organization can be tightened up a bit too.
My goal is to give a fairly complete description of what we do. I don't want
to try to hide things like the largely social nature of much of what goes on
here, because I want to get into the situation M-Net found itself in where
lots of people were trying to bend Arbornet to fit their reading of it's
501(c)3 status. I want to get approval for Grex as it is, and as we want it
to be, warts and all.
Which is not to say I won't try to put the best possible light on everything.
I honestly think that warts and all, Grex is very well qualified for 501(c)3
status. This is an amazingly good organization from a public service stand
point.
OK, here's my draft:
=============================================================================
The primary activity of Cyberspace Communications, occupying about 95% of
our organization's time, is the operation of a public access computer system
called "Grex." This computer system is currently housed in a rented room at
416 West Huron in Ann Arbor and has been in continuous operation since June
of 1991. It is operated by a volunteer staff under the direction of the
Cyberspace Communications board of directors and currently has about 15,000
registered users. Grex provides a wide range of services to the community
that further the mission of Cyberspace Communications:
(1) We maintain a bank of dial-in modem lines in Ann Arbor (at 313-761-3000)
and an Internet connection (at grex.cyberspace.org).
This allows people in the Ann Arbor area to easily access our service
(through the dial-in lines), but also allows access by people all over
the world (through the Internet connection). "Obsolete" computers and
modems readily available for less than $45 are more than adequate to use
all of Grex's dial-in services.
(2) A simple registration process enables users coming in from either the
dial-in lines or the Internet to create Grex accounts for themselves.
This process is designed to be as barrier-free as possible, encouraging
the widest possible range of users to access our system. Users are not
required to pay any fees, nor are they required to give any information
about themselves. Accounts are created immediately and there is no delay
in gaining access.
This registration process is the key to our charitable mission. It
enables a wide variety of people who could not otherwise afford Internet
services to use our system. We serve many poor people as well as other
users who could not justify paying commercial rates for services they
only use occasionally. People from all over the world connect over the
Internet to access services that are prohibitively expensive or completely
unavailable in their own countries.
Our open registration policy also supports our educational mission. Our
free and anonymous access means we have a very large population of young
users, as well as many older users who want to experiment with the
Internet without paying to do so.
(3) We produce a variety of instructional materials, both printed and
electronic, designed to help people learn to use Grex. We answer hundreds
of user questions a week through E-mail and our on-line live help
facility.
Educating users in the use of Grex is an necessary component of both our
educational and charitable mission.
(4) Grex hosts electronic conferences on more than 100 topics, all of which
are open to all of our users. Typical conference topics include music,
the arts, writing, consumer information, housing, finance, small business,
philosophy, living with disabilities, men's and women's issues, parenting,
pets, computers hardware and software, nature, cyberpunk, and role playing
games. There are also rather non-topical "creative" conferences, and a
general discussion area called "agora". All Cyberspace Communications
policies are discussed and developed in a public conference called "coop".
These discussion forums are the key to our educational mission. The only
direct teaching done by Cyberspace Communications is focused on how to
use the system. Our broader educational mission is served by providing
and maintaining these discussion forums where the content is entirely
generated by the users. The wide range of users attracted by our open
access policy ensures a wide range of knowledge and opinion. On-line
forums are very effective in drawing people with diverse backgrounds
into common discussions.
Cyberspace Communications does not attempt to limit discussion to
"serious" topics. We believe that simply socializing on line can
greatly aid the personal development of many of our young users. On-line
forums can be a very non-threatening environment in which to learn social
skills, up to and including those needed to democratically run a community
(5) Grex provides a range of basic Internet services, allowing all users to
send and receive E-mail, surf the web, post their own web pages, and
retrieve files off the Internet. In all cases, our service is of much
lower quality than commercial servers, using older, non-graphical user
interfaces and a rather slow Internet connection, but it is nevertheless
usable.
Providing these services for free is an important part of our charitable
mission, and helping people learn their use is an important part of our
educational mission.
(6) As a volunteer operation, Cyberspace Communication constantly works to
recruit and train new people to help run Grex. For several people,
experience running Grex has been a vital step in launching or advancing
careers in computing.
(7) Out of necessity, Grex's staff must be very active in policing the system,
ensuring that hostile users do not abuse our service to the detriment of
our other users or of other systems on the Internet. However, we
recognize that many of the "problem" users are, in fact, young people who
need guidance to become good citizens of the net, so we strive to respond
to problems in an educational rather than punitive manner. We believe
we have had a very good success rate with this.
Other activities of Cyberspace Communications include:
* Publicizing the services offered through Grex. Since Grex is well-
established and well-known and already badly overburdened with users,
this activity currently accounts for under 2% of our time. We increase
our publicity whenever we expand our resources.
* Repair and distribution of used computers to people who need them to
access Grex and lack the money or expertise to obtain them. There has
been little demand for this to date, so this activity has accounted for
less than 2% of our time.
* Fundraising to support Grex. We are primarily funded by donations from
our users. We have not been very active in seeking outside funding lest
we lose the sense of being a "grass roots" organization, nor do we like
to pressure our users for money very much lest we scare off people who
cannot afford to pay. Thus our fundraising is very passive, consuming
less than 1% of our time.
Users of Grex engage in a wide range of off-line social activities, but
Cyberspace Communications itself has very little involvement in organizing
or funding these activities.
============================================================================
This is possibly over-long, but I don't know what the normal length is.
There is a large blank on the page, but it is pretty clear that they don't,
in general, expect all the answers to fit in the blanks. I probably want to
do some compatification of this document, if only to improve its readability.
Next couple question:
(2) What are or will be the organization's sources of financial support?
List in order of size.
The ones that come to mind:
- Memberships.
- Other individual and corporate donations of money, goods, and services.
- Sale of promotional items (T-shirts, etc).
- Special fundraising events (charity auctions, etc).
(3) Describe the organization's fundraising program, both actual and planned
and explain to what extent it has been put into effect. Include
details of fundraising activities such as selective mailings, formation
of fundraising committees, use of volunteers or professional fund
raisers, etc. Attach representative copies of soliticitions for
financial support.
This should be easy, since we really aren't very aggressive fund-raisers.
We can attach printouts of the !support command and the web pages that do
the same.
Next moderately interesting question is:
(8) What assests does the organization have that are used in the
performance of its exempt function? (Do not include property
producing investment income.) If any assets are not fully
operational, explain their status, what additional steps remain
to be completed, and when such steps will be taken.
I don't really believe they want a detailed list of every bit of broken
computer hardware we own. I think they just want to get a feeling that
the organization actually exists and has the wherewithal to actually pursue
activities it claims to pursue. I'll probably list something like:
Sun 4/260 - Main Grex computer - operational
486 PC - Grex router - operational
Sun 4/670 - Future replacement Grex computer -
currently being set up to replace the Sun 4/260
Many Modems - operational
Many spare computer parts, office furnature, etc.
Next interesting question:
(11) Is the organization a membership organization?
If yes, complete the following:
(a) Describe the organization's membership requirements and attach a
schedule of membership fees and dues.
(b) Describe the organizations present and proposed efforts to attract
members and attach a copy of nay descriptive literature or promotional
material used for this purpose.
(c) What benefits do (or will) the members receive in exchange for their
payment of dues?
We are a membership organization, and I think most of this is pretty
straight-forward. Except I think the "institutional members" described in
the bylaw amendment currently being voted on are, legally speaking, not
"members" at all, since they can't vote.
(13) Does or will the organization attempt to influence legislation?
If "Yes" explain. Also, give an extimate of the percentage of the
organization's time and funds that it devotes to this activity.
This is a tricky one. From the instructions:
An organization is attemtping to influence legislation if it contacts or
urges the public to contact members of a legislative body, for the
purpose of proposing, supporting, or opposing legislation, or if it
advocates the adoption or rejection of legislation.
If you answer "Yes", you may want to file Form 5768, Election/Revocation
of Election by an Eligiable Section 501(c)3 Organization To Make
Expenditures To Influence Legislation.
I want to answer "yes" to this one, just to keep the door open for Grex to
do things like black out its web page in protest of the CDA and even issue
statements opposing such legislation. This isn't really a primary purpose
of Grex though. People wanting to do such things are probably better advised
to use organizations like the EFF or ACLU as their vehicle. Still we should
leave Grex some leeway on this.
Political activity is kind of a sensitive area of tax-exempt organizations.
From the IRS's publication 557 ("Tax Exempt Status for Your Organization"):
POLITICAL ACTIVITY. If any of the activities (whether or not substantial)
of your organization consist of participating in or intervening in, any
political campaign on behalf of (or in opposition to) any candidate for
public office, your organization will not qualify for tax-exempt status
under section 501(c)(3). Such participation or intervention includes
the publication or distribution of statements.
Whether your organization is participating or intervening, directly
or indirectly in any political campaign on behalf of (or in opposition
to) any candidate for public office depends on all of the facts and
circumstances of each case. Certain voter education activities or
public forums conducted in a non-partisan may not constitute political
activity under section 501(c)(3); while other so-called voter education
activities may constitute prohibited activity. If your organization is
uncertain as to the effect of its voter education activities, you should
request a ruling from the Internal Revenue Service[...].
My reading is that this doesn't prevent us from opposing things like the CDA,
or having people argue about who they want for president on-line, but it would
prevent Cyberspace Communications from endorsing particular candidates. I
think this is fine with us. My plan is to check this box "yes" and say that
Cyberspace Communications sometimes takes official public stances on issues
directly relevant to our mission, such as those relating to privacy and
censorship on the internet. I'd give our blacking out our web page in protest
of the CDA as an example, and say that this activity is less than 1% of our
total activity.
Next question is:
(14) Does or will the organization intervene in any way in political
campaigns, including the publication or distribution of statements?
I'd give a flat "no" on this one. Not only do I think saying yes would
endanger our 501(c)3 application, I really think it would be an inappropriate
thing for Cyberspace Communications to do under any circumstances.
Part III of the application is "Techical Requirements". Basically, we fail all sorts of tests here because we waited too long to file this form after organizing Cyberspace Communications. The upshot of all this is that we will only be able to request tax-exempt status effective the date our application is filed, not retro-actively for the full history of Cyberspace Communications. Too bad, but OK. There are some questions relating to whether we are seeking a definitive (final) ruling on our case or an advance ruling. Definitive rulings are based on past financial data. That's what we want, I think.
Part IV is financial data. We are required to report financial data for the
current year, and the three preceding years. Stuff we need includes:
Gifts, grants, and contributions received.
Membership fees received.
Gross investment income
Net income from organization's unrelated business activities not included
in gross investment income
Tax revenues levied for and either paid to or spent on behalf of the
organization
Value of services or facilities furnished by a government unit to the
organization without charge (not including value of services or
facilities generally furnished the public without charge)
Other income (not including gain or loss from sale of capital assents)
Total of the above
Gross receipts from admissions, sales of merchandise or services, or
furnishing of facilities in any activity that is not an unrelated
business within the meaning of section 513.
Total
Gain or loss from sale of capital assets
Unusual grants
Total Revenue
Fundraising Expenses
Contributions, gifts, grants, and similar amounts paid.
Disbursements to or for benefit of members
Compensation of officers, directors or trustees.
Other Salaries or wages
Interest
Occupancy (rent, utilities, etc)
Depreciation and depletion
Other
Total Expenses
Excess of revenue over expenses.
They also want a current balance sheet, showing
ASSETS:
Cash
Accounts receivable, net
Inventories
Bonds and notes receivable
Corporate stocks
Mortgage loans
Depreciable and depletable assets
Land
Other assets
LIABILITIES:
Accounts payable
Contributions, gifts, grants, etc, payable
Mortgages and notes payable
Other liabilities
Looks like fun, eh? Luckily we have an awful lot of zeros in an awful lot
of those boxes.
That's about it. We also need things like our EIN (Employer Identification Number) and conformed copies of our articles of incorporation and lots of other little tid-bits, but most of that will be simple.
Jan, is it true that "all users" can "surf the web" from Grex? I applaud Jan for all the work his is adopting when taking on this project. Also, I agree 100% that what we say in our application has to match what we are not what the IRS would like to hear. There is going to be a strong temptation to bend things a bit to get it by. I hope we can avoid doing so.
Yes, lynx is accessible to all users. The part about all users being able to retrieve files isn't quite right. I'd forgotten outgoing ftp is restricted to members. I need to cut that out.
This response has been erased.
from what I've seen here, it looks to me like Grex is eligible for 501(c)3. If needed, I'll help with the form, although I'm not sure how much help I'd be.
HVCN should be able to get you a copy of it's (successful) application. I have to remember to bug Arnold to get this for you.
re 9:
If a political candidate were to log into Grex and say stuff relevant
to their campaign, would that constitute Cyberspace Communications publishing
or distributing the candidates statements?
Answer "yes" to (13), and file 5758. This regularizes the procedures. You cannot *avoid* doing things that might influence legislation, so you best adopt the formal procedures under 5768 (I have just recently gotten another organization to elect 5768). I have the HVCN material that Arnold provided, and will pack it up to send to Jan. Nothing seemed to be happening on this for a long time, so it was easy to procrastinate. By the way, the IRS has just issued new final rules on "perks". Dues to a 501(c)3 organization are tax deductible, but now all membership benefits "that can be exercised frequently during the membership period" do not have to be disclosed, if the dues are less than $75. This neatly covers the telnet "perk". The details are, of course, long and complicated, but the result is that there is no longer any argument over such frequenhtly exercised "perks" being allowed or disallowed. (Examples given in the regulations are such things as discounts on goods or services and parking fee reductions, for members.)
I think we are safe with politics. Any political candidate will have the same platform as anybody else on Grex.
I'll have to figure out what 5768 is. I certainly agree with saying "yes" to (13). I look forward to receiving the HVCN material. You can mail it to me at 406 West Liberty, Ann Arbor, MI 48103, or get it to us some other way.
5768 is just a form. You can download it from the IRS. The board most adopt a motion to elect to lobby under its terms, which are specific. Without it, you are in the *undefined* "no substantial part" category.
Wow, that's a lot of work, Jan. Thanks for doing it. Here are a few things: #5: In (3) "an necessary component" should be "a necessary component". You need a perion at the end of (4). #6: I do occasionally approach individual users and ask them if they'd consider becoming members of Grex. Don't know if that counts as fundraising efforts of Cyberspace Communications or not. #7: How about replacing "many modems" with "15 modems" (or whatever the correct number is). I guess I need to organize the financial records for the last 3 years.
OK, I've been reading up more on 5768 and Lobbying expenditures. Basically,
if "attempting to influence legislation" is a "substantial" part of an
organization's activities, it does not qualify for 501(c)3 status. I haven't
found a good definition of "substantial," but I have found a definition of
"attempting to influence legislation." It includes both "grass roots
lobbying" which consists of trying to influence the opinion of the general
public on an issue before legislation, and "direct lobbying" which is
communications with members of the legislature. Exceptions include:
- making available results of nonpartisan studies or research.
- Examining or discussing broad social, economic, and similar problems.
- providing assistance to a government body in response to a written
request for information.
- appearing before or communicating with any legislative body with respect
to a possible decision of that body that might affect the existence of
the organization, its powers and duties, its tax-exempt status, or the
deduction of contributions to the organization.
So, if something like the CDA came up again, Cyberspace Communications would
be OK writing letters to our senator saying that it is a direct threat to
our worthy system, but apparantly asking our users to do so would be barred.
Our response to the CDA was, in fact, to black out our web page and post the
blue ribbon icon. This is "grassroots lobbying" and doesn't fit any of the
exceptions above, but since that is, to the best of my knowledge, the sum
total of Grex's "lobbying," it is pretty clearly not "a substantive part of
our activities" so we were still OK. I have a hard time imagining such
activity ever becoming what anyone would call a substantive part of our
activities.
However, even if it did, dropping 501(c)3 status is not the only option. You
can file form 5768 to change the rules under which you are tested. If you
elect to do so, the "substative part of your activities" test is replaced
with a limit on lobbying defined in terms of how large a fraction you can
spend on lobbying. Under these rules, Cyberspace Communications would be
limited to spending on direct lobbying to less than 20% of our exempt
expenditures, and spending on grassroots lobbying to less than 5% of our
exempt expenditures. If we exceed those limits, we have to pay an excise
tax. If we spend more than 150% of those limits, we loss our 501(c)3
status. (Actually, the rules are much more complex, but I've simplified them
on the assumption that Grex's tax-exempt expenditures are not going to exceed
$500,000 any time soon.) If we elect this option, we must file a form each
year declaring how much we did spend on lobbying.
My feeling is that we should skip form 5768 for now. You can switch back
and forth reasonably freely. If during the course of some year we decided
that we would be doing more lobbying, we could, any time during that year,
submit a 5768 and change our status for that tax year. I don't forsee that
happening. We aren't a lobbying organization. I'd only support getting
into that if it were clear that in some way Cyberspace Communications was
uniquely suited to play a role in lobbying for some legislation that directly
impacted our mission. I expect to see plenty more legislation coming around
that could impact us, but in almost any case I can imagine, there are better
vehicles than Cyberspace Communictions to fight such fights (such as the
ones that did, in fact, fight the CDA).
I'd want to say something to that effect on the application form maybe:
>Does or will the organization attempt to influence legislation?
Yes.
>If "Yes," explain. Also give an estimate of the percentage of the
>organization's time and funds that it devotes or plans to devote to this
>activity.
Cyberspace Communications does not attempt to influence legislation as a
substantial activity. Legislation is often discussed by users of our
system, but Cyberspace Communications does not limit participation in or
otherwise attempt to influence the content of such discussions. Cyberspace
Communications may, in the case of legislation in areas that would directly
impact our mission (e.g., Internet free speech and privacy), take a public
stance on issues, but this would be unusual and never a substantial part of
our activities. Our only such action to date was joining the "blue ribbon
campaign" against the "Communications Decency Act" by blacking out our web
page. Given the uncertain future of Internet legislation, the possibility
that Cyberspace Communications would elect to make more substantial lobbying
efforts, as allowed for under section 501(h), cannot be excluded, but our
plan and firm expectation is that lobbying will continue to account for
less than a hundredth of one percent of our activities.
501(h) is the section of the tax code enabling the alternate rules invoked
through the 5768 form.
Sounds good to me.
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Re #21: I have posted the HVCN info to Jan - and also the successful 1023 for the MKC (including the sparring with the IRS that ensuded).
Thanks for sending him thatm Rane. I was at his house and watched him open that package at the most recent staff meeting. I know he has it and I'm sure it will be helpful.
Yup, I have it and it will be very helpful. Arnold Barr has also phoned me to offer assistance as needed.
That's an amazing amount of work, Jan! I have one suggestion for things we do to educate the public: We contribute to general literacy by providing incentive to and practice for young people (and not so young people) in using their reading and writing skills. To us "word junkies" that may not seem obvious, but in these days of "Why Johhny Can't Read" and aflling SAT scores, it *is* important.
Hey, Grex was the biggest factor in my current typing skill. :)
Hey, yeah -- me too! <grin>
working in a computer related industry, and having to do online conferencing such as this and trying to get through stuff really fast etc.. also contributes to my typing skill
Hello I suggest the entry about world peace or racial/tension between countries. IMO Grex help variopus people from several countries to contact each other and eliminate prejudice etc. It can help in world trade/contacts. If they refuse it, send me e-mail, I will pull some long string. << Rented >> Perhaps I must make some property investment in Michigan? Best regards (AW) PS: you can access Grex using old terminal/VT 100 connected to modem and free/cheap local BBS that offer TELNET access. You can still access FTP using Grex for non members using FTPmail. I have program Oneup to collect all parts of the huge file.
I wouldn't put much faith in grex helping with world peace and racial tensions, even if there wasn't a slight race problem. It's not particularly applicable, at any rate. This isn't really the place to talk about property investments.
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That also has the potential for contributing in its own small way to the start of world war III, Valerie. But seriously, *if* we claim to be providing a context where people from all over can meet & learn to get along, rather than claiming to be solving world problems by this, it definitely belongs in the application.
That's a great suggestion, Amin! Thanks -- and thanks, too, to Valerie and Dave for the refinements.
Unfortunately, a substantial number of them don't get along. Ah well.
Unless I read the instructions incorrectly, we will have to pay a $150 application fee when we submit our 501(c)3 application. Now that we have the new computer up and running, we should consider having a fundraiser for that money.
is the sale of the old machine a possible source of this money?
Not really. It's pretty worthless at this point.
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Okay, the agora people said to put any arguements against 501(c)3 here. What I notice is that there is very little discussion here, and none for the past 7 months. Plesae do not go the 501(c)3 route. Please. Have you not looked in on m-net at all? Have you not seen the item after item after item of agruement, not discussion, from the so called experts stateing the M-net is not in compliance with 501(c)3 status? The arguements from lawyers stateing the M-net board is gonna go to jail for fraud because it isn't 501(c)3 compliant? Are you ready for the kibbutzers and people with percieved injustices who will use the 501(c)3 to create conflict on the system? Do you want that kind of conflict here? Are you ready for the inspection visits from IRS reps? Are you ready to argue the contents of the letters telling you you are okay with the IRS, but members don't believe it? Have none of you even listened to the vehemence coming at the board from disgruntled people who also visit here, adn who I am sure will not hesitate to slam grex for taking 501(c)3 status? Right now, I love grex because it is a haven from all that conflict. You can say you follow the rules for a 501(c)3, but you are free to do what you want. M-nets board has to look at everything we do and make sure it doesn't violate the 501(c)3 requirements. And we do have to pay property taxes. To the city government.
(We don't have property.) First off, we already have to examine *everything* to make sure we are 501c3 complient. It's in our bylaws that Grex will always do everything 501c3 complient whether or not we actually have the status. So that will be no different. Second is the fact that Grex is applying for a *different* 501c3 than M-net. The problems M-Net is haveing should come up. If we were to have problems being complient with our 501c3 as we apply for it, then we wouldn't get it. We aren't telling the government that we will do anything we arn't already doing. M-Net's situation is a whole different can of beans than ours.
The biggest negative I see on 501(c)3 status is that we are so near Arbornet, which is a bottomless source of mis-information and dis-information about 501(c)3 status. I have not only looked very closely at Arbornet's internal 501(c)3 battle, I participated in those discussions for something like their first year or two, and know quite a lot about the history and roots. In my opinion it is 95% Arbornet politics and 5% actual law. There are hundreds of thousands of 501(c)3 organizations, and Arbornet is the only I've see work itself into such a lather. People who want to create conflict can always find an excuse. Arbornet's 501(c)3 status is not the source of Arbornet's in-fighting, it's just one of the favorite weapons the participants use to bludgeon each other. Arbornet's 501(c)3 status dates back from around 1986, when Arbornet was probably the world's first and only group-owned, group-operated, non-profit virtual community. This was long before the merger with M-Net, and many of the people involved had visions for what Arbornet would become that are quite different from what Arbornet is today. Thus, the contents of Arbornet's original 501(c)3 application do not accurately describe what Arbornet/M-Net is today. This gap has been used by various users to attack the current Arbornet leadership on the basis that they are not complying with 501(c)3. I think it is pretty clear that Arbornet's 12-year-old 501(c)3 papers do not accurately describe Arbornet's current operations. There is nothing surprising or shocking about this. Most organizations apply for 501(c)3 status immediately after they are first organized, when the whole mission is just a vision that the organizers hope to pursue. I'm sure that very few such organizations still exactly fit the orginal paperwork 12 years later. I doubt if the IRS would expect it to. Though all organizations evolve, clearly to retain your 501(c)3 status you must still fit the somewhat nebulous requirements for 501(c)3 corporations. Thus the question is not so much whether Arbornet is doing what it said it would do in its original 501(c)3 application, but whether what Arbornet is doing now fits within the 501(c)3 regulations. Parts of those regulations are very clear, other parts are not so clear. Lawyers (with or without law degrees) can debate whether Arbornet is in 501(c)3 compliance until doomsday (a process that seems alive and well on M-Net), but only the IRS can decide. About two years ago I proposed on M-Net that they do the sensible thing - ask the IRS if they are still in compliance. That's the only real way to resolve the question. Interestingly the people who most criticize Arbornet for non-compliance hated the idea most vehemently. They said the IRS would dun Arbornet for billions of dollars in back taxes, fine all the board members, and throw them in jail. So these people have the board too afraid to even talk to the IRS. I'm sure there is a procedure for organizations to register changes in their mission with the IRS, and I'm sure that procedure doesn't generally get too many board members executed, and I'm sure that the ones who are executed don't suffer any worse than board members on Arbornet already do at the hands of the good folks in the M-Net policy conference. Grex's situation is quite different. Partly due to laziness, partly due the horror stories from Arbornet, we have been absurdly late to file our 501(c)3 application. This has some advantages though. Our application will not contain our best guess at what kinds of good things Cyberspace Communications will do in the future. Instead it will be a complete and honest description of what we are doing now and have been doing for the last six years. As long as we tell the truth in our application, which we have taken great pains to do, then there will be no question of compliance unless Grex changes in some major way. For example, if we shut down the newuser program, or started charging usage fees, we might have to re-examine our 501(c)3 status. That would be fine - I'd argue that if we wanted to change Grex that drastically we should shut down Cyberspace Communications and start a new organization to pursue the new mission. Grex has been through many changes in its lifetime, but its basic mission has been very constant. I have no problem with the additional locking-in to that mission that would result from 501(c)3 status. The basic principles of this system are not supposed to be fluid. >Are you ready for the inspection visits from IRS reps? Sure. Why not? We have nothing to hide, and we fully recognize the right of the IRS to review 501(c)3 organizations for compliance. If problems arise, we will be happy to work with the IRS to resolve them, either by changing what we do or dropping the 501(c)3 status, whichever best fits our needs. We are not afraid of the IRS. If we were afraid of the IRS, then we'd probably be well advised to avoid 501(c)3, but we aren't. My biggest concern with 501(c)3 is that some of those M-Net users who have latched their egos to the Arbornet 501(c)3 debate may feel it is necessary to carry that debate over here least Grex's taking a sensible approach to the 501(c)3 question undermine the scariness of their favorite bludgeon. I think that can be handled. >And we do have to pay property taxes. To the city government. Part of our rent presumably goes to pay property taxes. I wonder if we could get a rebate on that, something like the Homestead Property Tax Credit, if we were tax-exempt, or even as a poor non-profit?
Jan pretty much responded accurately to all the contentions. I have a couple of dozen person years experience in 501(c)3 tax exempt organizations and I have never heard of the IRS visiting, much less even inquiring. If you make *lots* of money, and your 990 reports look fishy, they might ask for an explanation. I don't think Grex would even have to file 990s (just a form stating they don't have to file a 990), but even if they did, it is just another income tax form, similar to what everyone files. There is no reason to set up M-Net's peculiar inner turmoil as any kind of model for Grex.
Well, actually, Arbornet *did* get audited by the IRS, and we got visited
by an IRS rep as part of the audit in September '96. He said what
M-Net was doing complied with what the IRS wanted. We got written
confirmation of that last summer. When I posted that confirmation,
most of the turmoil died down.
All Bruce and I can do is warn you that *any* disgruntled
person can cause an argument about 501(c)(3) even if s/he has his
head wedged. 99.9% of the population is completely ignorant about
tax stuff, and self-appointed "experts" on either side play to that
ignorance.
In another item far, far away, bruce allen price (bru) wrote, in part: M-net is 501(c)3. The M-net equipment is property. The city charges M-net city taxes each year and we pay them. ASk dpc how much they are. To which Dan Romanchik (danr) responded: With regard to taxes, why is 501(c)3 any different than being a non- profit corporation? That is to say, if M-Net legally owes city taxes, chances are good that so does Cyberspace Communications. I don't 501(c)3 status is the determining factor. A2 may have something like personal property taxes, possibly something specific for corporations. I'm with Dan. People who write laws do bizarre things, but the idea that gaining 501(c)3 status will make us liable for taxes we're not now liable for ... well, if you believe *that* I've got a bridge I can get you a good price on. (OTOH, we really ought to find out if we do owe city PP taxes, right? (When are cities like A2 going to start putting those laws on the web?))
While awaiting the legal opinion of dpc, I would suggest that gaining *tax-exempt* status will allow us to pay FEWER taxes than we do now, not more. We are already a corporation; becoming a corporation with tax-exempt status will help on the tax issues, not hurt.
maybe m-net has been paying "property" taxes on non-land property?
I've no idea where matters stand with grex, but I happened to talk to a restaurant owner once who said that he did, in fact, pay property tax on the restaurant firnishings and equipment, even though he was also separately renting the building he was in. Since he was running a commercial restaurant in store-front property, it's quite likely his tax situation is wildly different than grex. Given the # of large companies with millions of dollars worth of property, my guess is that the tax rate, if any, is pretty low, and given that grex actually has very little capital equipment (probably less than $1000 in value) chances are the taxes aren't really worth the city's while to collect. It should be pretty easy to find out however.
If we do need to pay property taxes, now is probably the time to find out about it. This is really the first time in Grex's history that we've been running new commercial grade equipment, instead of old stuff put together from spare parts. The Ascend Pipelines and the 670 are all things that we didn't have a year ago.
The MKC is a non-profit 501(c)3 exempt Michigan corporation with its registered office in Ann Arbor, but it has never been contacted by the city with regard to anything, much less taxes. This does not establish what the law is, of course, and I would be interested in knowing where the lines are drawn.
I checked with someone (not a lawyer, but deals with this stuff). He says that Corporate Personal Property Tax indeed exists in A2 (& in every city in Michigan, by state law). Yes, it would cover furnishings, equipment, etc. He thinks that a Michigan nonprofit is almost certainly not liable, however. I don't recommend taking his word for it without checking the law; but I'd say he's probably right.
A few years ago, Arbornet was assessed a couple of hundred dollars in property taxes form the city of Ann Arbor. Arbornet appealed the bill and tried to get a retroactive exemption, and both of these moves were denied. I guess that's what Bruce was referring to.
Were they 501(c)3 exempt at the time? I think we need to know the grounds for that tax and how their situation differed from other non-profits.
Yes, Arbornet was 501(c)(3) exempt at the time we contested Ann Arbor's
right to collect "personal property" tax (a tax on business property
that is not real property). The City and State have their own standards
on which businesses can be exempted from this tax, and Arbornet didn't
meet them.
The "personal property tax" is probably one of the least-enforced
in the Universe. The City has to know that you're in business, and then
it has to follow up by sending you a tax bill. I expect that the
City doesn't "know" officially that Grex is in business.
The tax rate is low. I think Arbornet paid $200 or so last
year in personal property tax, based on the computers and stuff in
the NEW Center.
Some one up there (sorry this particular connection doesn't let me scroll back) said that anyone who is so inclined can make 501c3 a real issue -- even if they're wrong. I'd say that's absolutely true. BUT -- that's far from unique to 501c3. Someone with a hankering to cause dissension can use *any* issue, including which direction toilet paper should hang, into a cause. I don't think that should let anyone influence their bahvior, either on the TP issue or on 501c3.
(It should hang from the front of the role. End of discussion. :)
I suppose my point is, that if you gain 501(c)3 status, it is more likely the city will notice you. But I still believe it will hinder you in what you can do as a corporation.
How?
because you have to consider every action you take as a corporation and how it will effect or be effected by your 501(c)3 status. It limits you in what you can do in a lot of areas.
That at least is a real argument against going for 501(c)3. I don't think it's enough to outweigh the advantages, but it applies, anyway.
Actually, our articles of incorporation begin, after giving the name of the corporation, by saying: The corporation is organized for such charitable and educational purposes as may qualify it for exemption from the federal income tax under section 501(c)3 of the Internal Revenue code of 1986, as amended (or the corresponding provisions of any future United States internal revenue law.) More specifically, such purposes include, but are not limited to, ... So actually, almost the only thing the articles of incorporation limit our mission to is obeying the 501(c)3 rules. The later articles do this in more specific detail, promising that no earnings will be distributed, no substantial part of our activities will be propaganda or influencing legislation, and so forth. Grex is already legally bound by *all* the restrictions of 501(c)3 corporations, and have always operated under those restrictions. I don't think there has ever been a time when we *wanted* to do anything that was outside those rules.
Re #63: whether an organization has 501(c)3 exemption or not, any organization has "to consider every action you take as a corporation and how it will effect or be effected by your <whatever it happens to be> status". This is no argument whatsoever.
Saying you will abide by 501(c)3 rules, adn actually being bound to those rules by law are two different things entirely. I can say I will follow the rules of vegetarianism, butif I slip and don't follow those rules, it isn't gonna hurt me. What exactly do you expect to gain from being 501(c)3 compliant? What advantages in business does it bestow exactly, other than the fact that donations made to you can be claimed by the donator on his taxes?
501(c)3 tax exemption gives donors a tax deduction, as you point out. It is also necessary for a Michigan charitable solicitation license. I think it helps get a Michigan sales tax exemption (but I am not sure if it is necessary). It is also necessary for most non-profits to obtain property tax exemption (it is evidence of one's charitable status, for the consideration of the township board to exempt property). Finally, it is necessary to establish an endowment fund with a Community Foundation, which would allow donations to be a Michigan tax credit. How much of this would be advantageous to Grex depends on what Grex does. At the very least, Grex raises money from donations. This source would be augmented if the donations were deductible. [The state does require that an organization be licensed to solicit donations from the public, which Grex does, though there may be some limit below which the license is not required. This should be looked into.] The other side of the coin is what *disadvantages* accrues from 501(c)3 tax exemption. The main one is that assets cannot accrue to the personal benefit of members. That is, Grex could not be a profit-making organization. In addition, sales could not be a major source of income.
We are legally bound to follow our Articals and Bylaws, unless they are changed. Hence, we are just as legally bound to be 501(c)3 as we would be if we got tax exhemption. More so, as a matter of fact, because we could let our 501(c)3 lapse, but we can't let our Articles lapse.
If nothing else, 501(c)3 status gives us credibility when we solicit donations. I've noticed that M-Net's solicitations often point out their tax-exempt status, and I'd like us to be able to do the same.
I've lost count of how many cool pieces of hardware and the like people have told me they would donate to Grex if we were 501(c)3, but couldn't otherwise.
What 501(c)(3) will do is allow Grex to pursue external funding; grants. As Arbornet has discovered, users don't donate in order to take a tax deduction. Tax deductable status is not an incentive for the users of M-Net to make donations, and I bet it wouldn't be an incentive for Grex users, either. Grants take a fairly large amount of work, because someone has to convince someone else with money to give away that they should give it to us, and not to some other worthwhile organization. I'm not convinced anyone will have a lot of time to spend on this kind of activity, but if no effort is put into it, then still, no harm is done by getting the 501(c)(3) designation in my opinion. And if effort is put in, and if it pays off, a lot of good could come of it.
Getting grants doesn't excite me that much. If we (grex) were to pursue grants, I would only want to see us do so for capital improvements, and not operating expenses. I would very much hate to see grex become dependent on grants for *operating* expenses. As free-nets were originally organized, they were supposed to be almost entirely funded by grants and such; this produced both good & bad experiences. Public TV is also partially funded by grants. It works better there because there is more "push" content that can be influenced by the grants. It's still a bit icky. More reasonable I think, are grants by individuals - even if it doesn't actually *attract* more grants, it will make people feel better about donating to grex, and there's certainly no harm in that--we *want* people to feel good about donating to grex. Another useful avenue for grex is in terms of acquiring obselete property. There are certainly plenty of corporations which would prefer to give obselete equipment to a 501c3 organization, than to dumpster it, or sell it on the open market. M-net never made good use of this largely because they don't have people with the right skills to deal with obselete stuff. On the other hand, here on grex, we've always specialized in the "bottom-feeding" technique, so we already have all the expertise we need in terms of doing this. We've also gotten feedback from potential and actual donors that if we had 501c3, it would facilitate their giving us *more* stuff. That means we might get stuff that was less obselete, and we could even take a stab at getting stuff from larger corporations that don't know us, don't want to know us, but do know what 501c3 is.
if we want to go for grants, then i would support the idea of a hired grant-writer, on the condition that the grant money that person brings in covers their compensation. this is not uncommon.
I basically agree with Marcus. I wouldn't mind getting grants for one-time purchases, but I don't want to become dependent on grants for operating expenses. Part of the problem is that once users hear that we are getting money from some seemingly bottomless source, they will be less inclined to give themselves.
I don't really like the idea of grants -- people who give away money in the form of grants generally have an agenda and I don't want to see Grex mired in pressure to meet someone elses agenda. Also, I *like* the idea that Grex is user supported. I think it makes a real difference in our sense of ownership -- and therefore the entire tenor of the community. On the other hand, I too have been privy to offers of corporate donations of hardware that never manifested because Grex wasn't 501c3 certified.
Most granting agencies specifically refuse to give grants for operating expenses. You are supposed to raise those from public donations. Re #76: there is a large business of grant-making, based in foundations created by people with lots of money wanting to do good works. Grants are always given *for a purpose*, but I would not call it a matter that they have an "agenda". The purposes for which foundations give grants are spelled out up-front, and the application process if clear and legal. You go where there is a "match" between your purposes and the grant giver. Then, their "agenda" is your "agenda".
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It is possible to get grants to support writing grant proposals.
Grants are also given for start-up of new ventures, which include salary and overhead, but the expectation that after a couple-four years, the organization will be on its own.
According to Aaron Larson (aaron), who wrote about it on M-Net years ago -- but please don't hold Aaron responsible for my memory of what he said -- a 501(c)(3) organization *must* depend on gifts for 30% of it's income. M-Net's patronships are not gift income, and so, of course, neither would be Grex's membership monies. Grants are gift income. This is the sort of rule that Bruce Price was warning you about, I think, and which no one at Arbornet has ever understood very well. Aaron harangued the Arbornet Board for years about these sorts of things, and in my opinion he confused us all enormously. I don't think the rules are really hard to understand, hard to meet, or that the consequences are dire if you don't know exactly what you are doing and have to make corrections, but a lot of people ran away from the Arbornet because of them.
Correction: membership dues in a 501(c)3 organization *are* exempt. Look it up. The recent revisions of the code spell this out more precisely.
Also, m-net and Grex handle memberships differently. There are no member lines here and very few perks of any kind. Most of those are not so much "perqs" so much as resource management and good net citizenship. That may also influence any differences in how the IRS percieves things.
Rane, I think membership dues are exempt to the extent they are donations, like if you buy a $500/year membership to an art museum that carries very little benefit, that's a tax exempt donation. If the membership is mostly to get you benefits, then it's a purchase. I don't know what the differences would be in how the IRS regards M-Net's patron and member charges, and how they regard Grex's member charges. I don't know if either would be considered donations that would count toward the 30% rule that Aaron used to bring up. Sounds like Rane has a better handle on this than I do.
The IRS literature explains it pretty well. Membership dues are deductible unless one receives "substantial benefits" therefrom (not received as part of the charitable activities of the organization). A newsletter to members only is not considered a "special benefit". Consult http://www.mayolawfirm.com/Philanthropy/Substantiation.html and read the link to Membership Benefits. Here is a brief selection: "Also disregarded for purposes of the substantiation and disclosure rules are certain membership benefits provided in return for an annual payment of $75 or less. The membership benefits may include frequently exercisable rights and privileges and admission to members-only events. When a donor pays for two or more memberships at one time and the amount paid is $250 or more, an acknowledgment is required, but the membership benefit exception applies to each separate membership."
Actually, I read the stuff Aaron sent the Arbornet BoD on 501(c)(3). As I remember (be advised it's been a couple of years ago) the "30% rule" does *not* say that the group must get 30% of its revenue from donations. It says that not more than 30% of the revenue can come from people giving large amounts. I call this the "anti-fat- cat" rule. It is perfectly in keeping with the 501(c)(3) rules to exist solely on revenues from operations and receive no donations at all.
Only if the "revenues from operations" are donations from the public. The support test, to which you refer, concerns the required support of the organization from donations from the public. To meet the Public Support Test the organization must normally receive at least 1/3 of its total support from government agencies and the general public. "Support" means grants from government agences and other public charities, and contributions from individuals and nonexempt organizations. David has it backwards with respect to donations from single sources. There is a further provision that if 1/3 does not come from public sources, only more than 10% need do so if the rest contains public "like" support, for example from endowment interest from a publically supported foundation (it gets murky between 10% and 1/3, so it is best to meet the 1/3 rule for operating income). There is also an exception for "unusual grants" from "disinterested parties". Revenue Procedure 81-7, 1981-1 C.B.621 lists the factors taken into account by the IRS in qualifying grants as "unusual".
More than half our income certainly comes from membership dues.
We (mkc) had to learn about this because a couple of major donors came our way. We *barely* satisfied the 1/3 rule for a while.
Some of the freenet stories I recall involved freenet's that got nice large startup donations to cover operating expenses. In the case I recall the most about, the operating expenses included a t1 connection, 1 or 2 full-time operators, and a bunch of phone lines. Only problem is they really didn't have another funding sources to cover those expenses when the initial grant ran out. There was a sort of basic incompatibility between the initial definitions of what freenet's were "supposed" to be, and the funding models defined by most grants.
Our 501(c)3 application will include a detailed description of where we get our money, and what benefits people get in return for the money they donate. If the IRS doesn't like it, they will let us know. My belief is that the IRS will like it.
then a real concern might be being locked into the current model of funding. however, if after consideration and much conjecture about what the future holds, it is concluded that this is the model we really do want, then no problem.
Grex was initially conceived as a member supported, member run conferencing system. I don't see it changing without the very fundamentals of what makes us Grex being undermined.
In the past I had concerns over what would happen to Grex if we applied for and got 501(c)3. Now, I'm starting to feel somewhat uneasy over where our evolution will take us if we don't. I'm very pleased it's Jan who will be stating our case.
By the way, if you'd like to see the financial information we'll be sending in with the application, it's in ~aruba/reports/501c3. It's basically a summary of our credits and debits over the last 3 years, and a list of all our miscellaneous financial activity.
And how are you coming on the payment of your city owed taxes? Or are you just going to ignore the city? Am I starting to sound like arron?
We need to investigate the issue of city taxes and discuss that at the next board meeting.
I have revised the numbers in the 501(c)3 report, and included a list of people who have contributed over 2% of Grex's donations in the past 3.25 years. You can find all the financial data in ~aruba/reports/501c3 .
Thanks, Mark. I glanced through it (not really *read*). s/compiter/computer/ somewhere in there ... The data was interesting.
(Suggestion to Mark, re #98: If you put the file in your www directory and post the URL, Backtalk users can access it too.)
wow, so if i donate another $360 or so, i can be an official "fat cat?" cool!
Thanks Dave, I fixed that typo. I'm toying with the idea of publicly thanking the top 50 or so contributors publically, but I'm not sure it's appropriate.
Thanks Mark. I've updated the application with your corrected numbers.
I still say this is a foolish thing to do...
...and I'm putting my $50 in the mail today, to help Grex do it. Say, bru, how much are you willing to donate to replace the financial benefits that Grex will receive by becoming tax exempt?
I still say you won't reap any benefits. Your outlay won't change. You will become noticed by the tax collection people who apparently aren't noticing you now, and the amount of paperwork required each year will probably triple laying an extra burden on your volunteers. What BENEFIT do you gain from being tax exempt.
The willingness of more people to donate and join (donations and dues are tax deductible); the ability to be able to apply for grants for improvements (most granting agencies require organizations be charitable, as shown by the tax exemption); the ability to be exempt from property taxes (if Grex ever has any real estate); the ability to be a partner in the world of charitable organizations; perhaps lower fees for exhibition space in fairs. That's just a beginning...
What percentage of our dues would be deductible once we subtract the fair market value of the benefit provided? According to the IRS, that we are willing to allow some to have the service without fee does not mean the service has zero fair market value.
the fair market value of our service would have to be very low compared to competitive rates for much higher tech services offered on a for-profit basis. what we offer is essentially invaluable.
The IRS is not concerned with that kind of value. The IRS permits 501(c)3 membership organizations to offer moderately liberal benefits to its members. Here is an extract from a web page discussing membership benefits: "Membership Benefits "Also disregarded for purposes of the substantiation and disclosure rules are certain membership benefits provided in return for an annual payment of $75 or less. The membership benefits may include frequently exercisable rights and privileges and admission to members-only events. When a donor pays for two or more memberships at one time and the amount paid is $250 or more, an acknowledgment is required, but the membership benefit exception applies to each separate membership. "Frequently exercisable rights and privileges include "free or discounted admission to the organization's facilities or events, free or discounted parking, preferred access to goods or services, and discounts on the purchase of goods or services." "Frequently exercisable rights and privileges also includes discounts offered by retailers to an organization's members. For example, discounts offered by restaraunts and music stores to members of a public broadcasting organization are disregarded for purposes of the substantiation and disclosure rules. Frequently exercisable rights and privileges, however, exclude the right to purchase tickets to collegiate athetic events." The site is http://www.mayolawfirm.com/Philanthropy/Substantiation.html#Membership Benefits if you want to read the rest of it. Use of Grex is like use of premises or a parking lot - a frequently exerciseable right. Since our dues are less than $75/a, it would appear that *any* "frequently exerciseable" rights we afford members do not need to be declared - except those tickets....
You WILL and SHOULD be pay property taxes. Are you still not paying property taxes? Is the city still unaware of your existence? Are you paying your city property taxes yet? M-net is a non-profit and we have to pay property taxes.
(don't know what happened to the end of my sentence...did you step on it, bru? .. 8^} ) ....it would appear that there need be no reduction in the deductibility of the dues since all the membership privileges are "frequently exerciseable". Consider the analogy of free parking for members at the premises of an organization: that has a significant market value, especially if you were in downtown New York, but that benefit does not affect the deductibility of the dues.
Why would a *renter* have to pay *property* taxes?
He's referring to the tax on corporate property. Homeowners don't pay this.
Thanks for the up to date info, Rane.
Renters do pay property taxes, their landlords.
("property" in #114 was to refer to stuff, not real estate - real estate
taxes are in addition)
I.e. taxes on non-liquid assets?
That is what is alleged. Mark, have you found out about this yet?
No, I haven't, and I leave on Monday, so I won't for a while. If anyone else would like to call the city and get the scoop, be my guest.
The property taxes in question are corporate *personal* property taxes, not real=estate taxes.
(that's what i've been trying to say...confusing language - our house is also our *personal* property...)
I'm not a lawyer, but I can offer some anecdotes: I once managed an apartment building in A2, and even though the place was furnished with typical student junk, we had to inventory all of it, and pay personal property (as opposed to 'real property', i.e. Real Estate) taxes on it. My understanding is that all commercial businesses are subject to it. Another anecdote: A friend runs a small testing lab in the city. He has been assessed personal property taxes on all the lab equipment stacked around his office/lab. Most of it is incomplete, non-functional stuff from UM's Property Control, or salvaged from a dumpster, in the hope that some business might come in, in which case it might be worth repairing. To the city, that stuff still had considerable value! I had to advise him to put all the non-working stuff at home in his garage, and declare his 'technical archaeology' to be his hobby. Buy his 'bargains' with personal, not company money, and 'sell' them to the business only if and when there is the need for that equipment to service a paying customer. After hearing this story, I realized why commercial companies seem to be so wasteful and quick to throw stuff away. If it's not an earning asset, it's a liability when the tax man cometh... Now, what does this all mean to grex? First, get rid of all unused equipment (the old Sun, those monitors, what else?) as soon as we identify that it doesn't fit our future plans. Second, plant a mole in the city tax assessors office. Find out when the local technology companies are going to be visited, and pay them a visit first, suggesting a 'donation' of their non-performing assets to a worthy local educ/charit 501c3. We just may find ourselves a little closer than 10 years out of date... Yes, the 501c3 might get us noticed.. We probably owe some tax already, so by rights we should be paying it. With the 501c3, we have the credentials to solicit donations from entities with deeper pockets. Now, dealing with the influence of those larger organizations on our decision-making process may be another matter entirely...
The 501(c)3 may also exempt us. That's the point that has to be settled.
I presume 'get rid of the old Sun' means to move it to some other place.
as opposed to what?
We *may* not even need to be 501(c)3 to be exempt. We should find out whether Michigan nonprofits are liable for PP taxes. I've been told they're not ...
re 126 as opposed to selling it or giving it away, since we might want a backup for a while
I don't think we have any particular interest in "not being noticed". We'll pay what taxes we are legally required to pay, and of course we will take any sensible and legal steps to minimize those taxes. Selling off obsolete equipment that we are probably never going to use is a good idea any way you look at it, taxes or no.
Are you guys thick in the head or what. Mnet is a 501(c)3. It is a non-profit. The city still says we have to pay taxes on our computer equipment. Why would Grex be any different? It would be nice if you were, adn that we at m-net could use that same arguement to get us out from under our taxes, but so far the city won't budge. So what is there to decide?
Nothing. If we are legally required to pay taxes, then we have to pay taxes. Being 501(c)3 has nothing to do with it. Not being 501(c)3 certainly doesn't mean we don't have to pay taxes.
I'm surprised that the city has not already approached Grex about this, since they have a record that Grex is incorporated in the city. My impression is Grex has never gotten any notice of anything about this - I know a non-profit that uses my home as its registered address has not been contacted. So - how about someone in authority in Grex *asking the city tax office*? Seems easy enough (once one gets up the nerve....).
Or ask a lawyer who's up on this area. My source (who said a nonprofit shouldn't be assessed corporate PP taxes) is *not* such, but has worked in city administration in several Michigan municipalities, & I'd expect him to be right on this kind of thing. But I agree entirely with Jan and Rane. This is no reason whatsoever for not going for 501(c)3. If we owe taxes, we should pay them. We should get some kind of *authoritative* answer on whether we owe them.
It's my understanding that Mark plans to contact the city. He didn't have time before he left but plans to on his return. If Grex owes taxes, it's better to find out before the bill gets too large.
M-Net's "personal property" tax bill runs around $150/year.
What is the 'millage'?
that assumes something. let's try, "by what algorithm is the tax amount determined?"
B. Publicizing the services offered through Grex. Grex is well-established and well-known and word- of-mouth advertising ... Notice the space in word- of-mouth. Hows' *that* for a nit?! ;-)
You have several choices: