Benefits of 501(c)(3) Status

Mollie Cullinane describes the benefits as having to do with tax exemptions, under Internal Revenue Code section 501(c)(3):

* exemption from Federal income tax -- we do not have enough income to be taxed, but we file anyway to establish a record;
* tax-deductible contributions -- this is worth knowing since we could encourage membership and donations when they can be tax-deductible (it would be worth generating a tax-deductible letter/form to offer donators upon receipt of goods, services, or money);
* possible exemption from state income, sales, and employment taxes -- membership dues are our only 'income' besides the money generated at the gourd auction at our annual show;
* reduced postal rates -- we checked into this and we would have to mail thousands of brochures or postcards to take advantage of this benefit, several dozen postcards is not enough;
* exemption from Federal unemployment tax -- no employees;
* tax-exempt financing -- nothing to finance as of now.

So, the biggest benefit we can make immediate use of is the tax-deductible letter or form to encourage donations for our outreach programs. Foundation Group adds another benefit which caught my eye: "Ability to apply for grants and other public or private allocations available only to IRS-recognized, 501(c)(3) organizations." Now we are talking benefit!  We can locate grants that align with our mission and hopefully be able to fund the equipment and materials. What if we could get money to fund toolbags of tools to use for gourd crafting educational seminars?

About the Prohibitions

Reviewing the prohibitions brings me to considering what our organization has done so far, and what plans are upcoming.

1 - It is obvious no one profits in any way from the public appearances and outreach the group does. In fact, many members and the officers are donating more time and resources to the group than we take in through membership dues. Members donate gourds for the outreach programs [an example is the 400 egg gourds that are going to a Kidz Fest gourd program at The Gathering at the end of October]. Tents, banners, tables,  and printed materials are stored at officers' homes. Printing of postcards and promotion posters is done by the husband of one member on his antique letterpress equipment. All in all, we are a volunteer organization. We manage our dollars very carefully.

2 - Political support. OH MY!  The officers and members come together for the enthusiasm of gourd we all have. We are a diverse political set of folks and purposefully resist talk or reference to anything political, especially in the current climate of the country. So, actively supporting or opposing anyone would only serve as a wedge between us. If a political figure had gourd skills we valued, then that would be another story but we would encourage his/her presence from the art/gourd point of view.

3 - Legislative actions....this could be a slippery slope if the right situations came along. What if gourds became a taxable item, different from the agricultural area? What gourd farms came under unfair scrutiny for business purposes?  What if gourds were found to be medicinal and therefore controlled somehow?  These are ludicrous from today's point of view, but things happen. Could we maintain a neutral stand when the core of our existence is challenged?

If we stay true to our core mission of education, encouragement, and support, we should be fine.

It would be a challenge, but we would maintain an honest system.

Compliance Guide - 3 Prohibitions

The foreword of the IRS Compliance Guide states "federal tax law provides tax benefits to nonprofit organizations." This particular guide reviews the activities that could mess with nonprofit status. [Later, we will review the IRS publication, Life Cycle of a Public Charity.] For now, there are specific situations that could provide evidence to support a revocation of nonprofit status.

Initially, is it important to note the officers, directors, employees, or in our case volunteers, must work to ensure nothing happens that will jeopardize our nonprofit status:

1- no one can profit, or accrue assets, from the organization's dealings; the IRS prohibits individual benefit because nonprofits serve a public interest, not private ones

2- we cannot directly or indirectly get involved in political campaigns; we can have members or guest speakers who happen to be in politics, but we are prohibited from promoting that aspect of the person.

General US interest, not politically specific.

For example, we can promote voting [have gourds that say Vote!, not not Vote for So-and-So.] Being a gourd organization, the closest we would get to this is doing goofy gourd art saying "Vote Gourdheads for Congress!"  BwHahahaAaAa!

However, having said that, we could not invite a political figure to our annual festival and promote him/her attendance as a political event. This kind of advertising would be deemed a violation in the eyes of the IRS and worthy of revocation of our nonprofit status. It just takes one complaint to the IRS!

3- we are not permitted to engage in "substantial legislative activity" such as lobbying. We cannot urge the public, members, or employees to contact anyone for the purposes of supporting, opposing, or proposing legislation. In the words so commonly stated around the patio, "We are Switzerland!"  We are neutral in matters of politics.

Is this guy for real, really?

Oh My Gosh!!  He is for real!

Positive Reasons for Being a NonProfit

The positive reasons for being a nonprofit basically involve money, either being able to gather it, or not paying taxes (so being able to keep and use more of it). Being a 501(c)(3) allows a group to write for grant money to pay for equipment, materials, employees(?, checking on that), and promotion of the group's mission. Right now, the Virginia Lovers' Gourd Society has been working with membership dues, money from the Virginia Gourd Festival auction, and volunteer donations. We do a lot with very little.

...very little money so far.

Where To Start...

Initially, the best place to start would be the IRS but that website is big and a little overwhelming. At first, what is needed is a summary of pros and cons for becoming a 501(c)(3) nonprofit.

We did it, but then "What to do?"

The Name, the Title, the Responsibility

When the Virginia Lovers' Gourd Society became a 501(c)(3) organization, little was known about the nonprofit status other than we could begin fundraising in earnest. There was a broad understanding of requirements, but when it comes right down to the gourd washing, there is a bit of detailed scrutiny to be done. Having our names on the dotted line puts the officers in need of intimate knowledge of the ins and outs of regulations.  So, when we say "501(c)(3) and Me", we take it personally! We want our chapter to grow and prosper, and we want to do it fairly and within the legal confines of IRS regulations...like all wizened gourds do, but without splitting our sides open in the process. THAT's too much in our book.

Welcome!

Welcome to this blog of what to do, what to do with a 501(c) (3) designation. We got it, we wanted it, and now we are apprehensive about what to do. What are the specifics?  What are the benefits? What should we do to stay within the guidelines of this special opportunity?

Come with us as we learn the ins and outs of what to do, and what not to do.