[hackerspaces] 501c3 and hackerspaces in the US

[James Carlson]

"One of the arguments being put forth is that members must not work on
individual projects, because that would be a benefit to the member
versus the public, and somehow violate the 501c3 rules."

I'm sure this isn't the case. The organization's mission in general is to
enable the members to do this. If the member's activity is 'operating a
sweat shop' and a huge portion of the 501c3 organization's resources are
devoted to this, the IRS will look askance because of the revenue being
generated by the sweat shop _using_ the non-profit will go to a private
source. That'll be a problem.

For 10 years we have operated a 501c3 hackerspace (and share our 501c3 with
38 other spaces at present) and have enabled the creation and formation of
over 100 for- and non-profit companies, 1000s of products, art projects,
and anything our members could dream up. The IRS has been over and through
our content and finances, and never thrown a flag over this.

It's a great conversation to start and have!

On Thu, Jul 5, 2012 at 4:38 PM, Far McKon <farmckon at gmail.com> wrote:

> Another options is 501(c)7 status.   I've worked with several community
> and a shared-equipment group that went 501(c)7 It's the classification
> of an elks-club, or Rotary club, or other 'social club'.
>
> Benefits:
> - still tax exempt
> - Lots less paperwork. *LOTS*
>
> Drawbacks:
> - Can't beg for giant donations (they are not tax exempt)
> - Not as cool/sexy when applying for grants.
>
> Most hackerspaces get little to no donations anyway, so it might be a
> faster and easier way to get some nonprofit status.  YMMV.
>
> hack on,
> - Far McKon
>
>
> On 7/5/12 4:02 PM, Buddy Smith wrote:
> > Hi Everyone.
> >
> > I'm hear to ask questions to my fellow hackerspaces in the US. I'm
> > sorry if this is off topic for those that are not in the US.
> >
> > Our local hackerspace is looking at becoming a 501c3, independent of
> > any other entity.
> >
> > Is your hackerspace a 501c3? How does it affect the day to day
> > operations of your space? Are there limitations on the use of donated
> > versus non-donated funds? (Donations vs dues and class fees, etc)?
> >
> > Are any US hackerspaces 501c7? That is designed for social clubs, and
> > may more closely fit the model of many hackerspaces.
> >
> > One of the arguments being put forth is that members must not work on
> > individual projects, because that would be a benefit to the member
> > versus the public, and somehow violate the 501c3 rules.
> >
> > (anonymous quote)
> > Basically, as a 501c3 organization, if there is an action that
> > benefits one or few members, it needs to be limited to a small portion
> > of the overall actions of a 501c3 in order to retain tax exempt status
> > plus accepting tax-deductible donations from the general public.  The
> > rule is not set in stone, because individual 501c3s are so varied.
> > Generally, things that are not allowed include (but not limited to)
> > storage at below market rate, exclusive services to members (e.g.
> > full-service garage that isn't available to public), as well as
> > for-profit activities (ex. a significant portion of revenue from
> > selling t-shirts that were silk-screened on site).
> > (end quote)
> >
> > There's more to it, but this is sufficient to start the discussion. I
> > look forward to reading your responses, and bringing them back to my
> > hackerspace.
> >
> > --buddy
> > _______________________________________________
> > Discuss mailing list
> > Discuss at lists.hackerspaces.org
> > http://lists.hackerspaces.org/mailman/listinfo/discuss
>
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