[hackerspaces] 501c3 and hackerspaces in the US

[Will Bradley]

This is a great thread and mirrors HeatSync Labs' experience getting its
501(c)3. We're an educational nonprofit, and memberships basically pay for
the rent and tools. We keep our doors open to the public and hold classes
regularly. If we get much more money, I'm sure we'd expand our
teaching/outreach.

I'm not a lawyer, but my argument is, the space itself and tools within it,
when combined with a bit of instruction, are themselves providing
self-directed education. Without the space or tools, people like us
wouldn't be able to learn. They're learning resources. This is an important
distinction to make, because a good "charity" spends a healthy percentage
of its money on fulfilling its charitable mission. Our mission IS to
provide space and tools, so we're good as long as we aren't spending
thousands on parties or "overhead" expenses.

Comments:

Our local hackerspace is looking at becoming a 501c3, independent of
any other entity.

  - I believe it's important to be somewhat independent. If you choose to
hitch your wagon to another entity, do all you can to make sure their
vision is aligned with yours and that there are no hidden or undesirable
strings attached. We've been bitten by this before.

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)?

   - We are. It doesn't affect too much, although if members stopped
opening the doors to the public or being helpful to newbies, we'd have to
step in and adjust to make sure we were staying true to our mission. We
can't afford to be insular. Due to our nonprofit status, many members have
a slight aversion to using the space for profitmaking activities. This is
fine, except that it can prevent inventions from becoming successful
businesses. It takes some effort to maintain a friendly atmosphere for
more-than-hobbyists.
   - If we have a big donor, we frequently ignore that money for budgeting
purposes since it could go away at any time. When it comes time for a large
tool purchase or emergency, then that money is there, but we don't count on
it. We aim to be (and are) self-sufficient on memberships alone. I call it
the "gym model" -- there's a certain ratio of dollars to members to daily
activity and you're aiming for a sweet spot.
   - Class fees are intended to compensate the instructor and go towards
machine maintenance, but I'm not aware of strict accounting for it. Simply,
the more people trained on a machine, the more people likely to use it. But
we wouldn't want to deny a machine maintenance because of insufficient
class fees.

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.

  - Others have described this issue more fully, but we were never made
aware of this argument during our 501(c)3 application. The underlying
principle is, make sure a good percentage of your expenditures can be
labeled as directly benefiting peoples' education, and all expenditures or
savings must be allocated somehow. If you save up a bunch of money, it's
ok, just explain what you're saving it for. (Rainy day fund, big tool
purchase, etc.)


One gotcha we were made aware of is selling things or competing with
business. For example if you sell Arduinos, make sure they've got your logo
on them, are ideally part of an "educational kit", and are not priced
competitively with Radio Shack or Adafruit. You don't need to charge sales
tax on items you sell; you can't use that advantage to compete with anyone.
If you sell t-shirts, make sure they're promotional/fundraising gear with
your logo on them, and you're not competing with the t-shirt business next
door, or Threadless, or Walmart. The good news is, as a nonprofit people
will tend to be ok with paying a bit more than retail.

The example we were given was, the Red Cross can sell first aid kits, but
they can't be priced or marketed competitively with Johnson & Johnson first
aid kits; ideally, they should be obviously-promotional items for the Red
Cross' humanitarian mission. OR, the Red Cross could give them away to
needy people as part of their humanitarian mission. (In fact this was the
subject of a landmark lawsuit both for trademark and nonprofit law:
http://en.wikipedia.org/wiki/Emblems_of_the_Red_Cross#Johnson_.26_Johnson_v._American_Red_Cross
)
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