[hackerspaces] 501c3 and hackerspaces in the US

[James Carlson]

http://www.stayexempt.org/Resource-Library/pdfs/Mod2_Summary.pdf

This short guide from the IRS is instructive-- related to "unrelated
business income" or UBI, it seems that we have many options. The key seems
to be understanding what our exempt purpose is so we can determine if the
income is truly unrelated. Who delivers the service is also important:


   1.

   Exceptions to UBI

   The Internal Revenue Code contains a number of exceptions to the usual
   rules of UBI. That means that some UBI is not subjected to tax. These
   exceptions include, but are not limited to, activities:
    -

       Conducted by a volunteer workforce,
       -

       Conducted for the convenience of organizational members,



So if we do a gaming night to raise funds for the space, and volunteers
conduct the event, it's not UBI even though "game night" might not be
related to our "purpose."

On Friday, July 6, 2012, James Carlson wrote:

> We haven't been restricted in our use of 501c3 in any way for the last ten
> years. The IRS looks for certain things through their 'red flag' detector,
> and if you do them with money you've received through the c3 as a donation
> or otherwise, it will likely trigger action:
> * Political engagement with a specific candidate (not allowed with c3)
> * All your donations entirely coming from a single source (then you're not
> a charity, you're a foundation)
> * Any money earned ever being paid to board directors
> * Money earned being more--a lot more, by ratio--than money given (you
> receive 5% in gifts and 95% from selling a product)
> While a c3 must be organized for these 'scientific, educational, artistic
> purposes' it's always possible to define what you do in those terms in some
> way, and even brings additional discipline to the work of the org. We've
> never found ourselves running afield of our designation. (Of course, if we
> tried to open a health clinic, we would. Or if we tried to get involved in
> politics. But we have other reasons for avoiding all that.)
>
> On Friday, July 6, 2012, Bert Hartmann wrote:
>
>> MakerBar has thought long and hard on this recently, and decided that
>> 501(c)7 was the right classification for us, due to the extra restrictions
>> on 501(c)3. 501(c)3 must be strictly for scientific, educational, artistic,
>> etc. purposes, which we didn't believe everything we did would be
>> "strictly" in that classification.
>>
>> To answer your question, it doesn't matter how the money came in though,
>> everything is restricted to your purpose the same (unless there was some
>> additional restriction given by the donor).
>>
>> One thing to note that we hope to take advantage of is the ability for
>> any (or most) 501 non-profits to create a 501(c)3 fund, which can behave
>> like a 501(c)3 in terms of donations and tax implications, but allows the
>> legal organization to remain some other classification, so you can continue
>> to operate outside most of the additional restrictions most of the time,
>> assuming you have enough funds outside of the 501(c)3 fund. This should
>> allow MakerBar, for example, to create an educational fund, donations to
>> which would be tax deductible.
>>
>> Hope that helped,
>> Bert
>>
>> On Fri, Jul 6, 2012 at 12:46 PM, Buddy Smith <buddy.smith at ieee.org>wrote:
>>
>>> Are there any limitations on the use of donated funds, versus member
>>> dues, etc?
>>>
>>> --buddy
>>> _______________________________________________
>>> Discuss mailing list
>>> Discuss at lists.hackerspaces.org
>>> http://lists.hackerspaces.org/mailman/listinfo/discuss
>>>
>>
>>
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