DISCLAIMER: These posts contain hints, tips and ideas from folks that have had some experiences dealing with this. It is NOT meant to be legal advice here - just related experiences. Please consult with a reputable professional if necessary. Date: Mon, 13 Jul 1998 10:16:25 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: EQ-ResQ: CLASS: Week of 7/13 - Incorp/Non-Profit We don't have an expert to lead this segment, but I'll try to sorta moderate it. I hope that you folks that have gone through it can step in and share your experiences with the others. I'll post some notes that went to the list in the past that discuss some elements of the filings. Would some of you that have gone through the filings in specific states be willing to be listed on the Equine Rescue Mailing List Home Page as a "mentor" for those that would like to file in those states? Perhaps share some of your paperwork with them? Let me know privately and I'll post a list here and on the EQ-ResQ Home Page. Pat Calloway, Equine Rescue/Creatures Listowner epona@concentric.net (AZ) http://pages.prodigy.com/equinerescue/home.htm http://pages.prodigy.com/equinerescue/creature.htm Date: Mon, 13 Jul 1998 10:20:52 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: EQ-ResQ: CLASS: Non-Profit/Filing (OH) Here are some notes that were posted to the list recently about filing: From: Janis.Comstock-Jones@ecr.net To: equinerescue@MyList.net Date: 18 Jun 1998 13:53:26 EDT Subject: EQ-ResQ: CLASS: Incorporation/Non-Profit Volunteer I've never taken an organization through all the steps, but I can contribute a little bit . I've heard the group should get non-profit status in the state first, then with the feds. This makes no sense to me, as I can't understand the advantages of not doing it all at once. If it's an incentive for donations, as well as to get a non-tax status, I'd think the fed level is the more desireable, and it should be done at the same time. If someone can comment on that, I'd appreciate it. Ohio has a free publication with the state rules, and it's very easy to read and understand. To me, the hardest thing is rounding up three trustees! Incorporation is not necessary in Ohio, according to this booklet, but it gives instructions for both kinds of status. I've been in many non-incorp. not-for-profits, and I'd say the majority have been long-established clubs where the officers have failed to keep up with the laws, forgotten they are supposed to submit reports, don't know where the by-laws are or when they were last revised, and the membership doesn't know they even have by-laws. I served as secretary on one of these, and it was a nightmare, trying to get the members to understand that this stuff is *important*. I've also held offices, been a director, etc., on well-run non's, and the reports are not so hard to complete, but the officers must understand that good records are important. In my professional life, until I formed my own business, I worked for one private college, one state Uni, one Community College, one JVS, county government, and two of the largest non-profits in the US (one is the largest in the world), as well as being a volunteer for many others, so I've soaked up a lot of non- and not-for-profit mundane tasks, just haven't gone through the process of gaining tax advantage status. Please, someone who has, share with us? Janis (SPHO--Ohio) http://www.ecr.net/gallifry/spho.htm Date: Mon, 13 Jul 1998 10:22:44 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: EQ-ResQ: CLASS: Non-Profit Book Continuing to forward pertinent recent notes: From: "Double D Equine Rescue" To: Subject: EQ-ResQ: Book on Non-Profits Date: Fri, 3 Jul 1998 23:44:04 -0400 For those of you wanting to start a non-profit, I highly recommed a book I got. It tells everything step-by-step. Helped us a whole bunch! It's called "How To Form A Nonprofit Corporation In All 50 States" It's $39.95 and the phone number to order it is 1-800-992-6656 Debbie Double D Equine Rescue Date: Mon, 13 Jul 1998 10:27:44 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: EQ-ResQ: CLASS: Nonprofit/Incorp - Which 1st? Still sending past notes that are pertinent to current class... Date: Thu, 18 Jun 1998 19:48:12 -0700 To: equinerescue@MyList.net, Ohrevlon@aol.com From: Mike Dodge Subject: Re: EQ-ResQ: CLASS: Next Class? To get non-profit 501(c)(3) status you must first have state incorporation and have exempt status BEFORE you apply for federal status. We did ours by ourselves and spent about $510 total. You really don't need a lawyer. You can do it yourself if you have the patience to wade thru the forms. We helped Debbie and Larry from Double D get theirs and it only took four days for approval from the state. Here in California it took nearly three months for approval from the state and another 8 months from the feds because we told them that we wanted to work on legislation. Wrong answer. If anyone needs help on the federal forms we can help with that at no cost. The fed filing fee is now up to $500, which is a business expense. Once you have your state exemption you can ask for donations(I checked with a CPA on this) even before you have your fed. exemption. The forms seem confusing and they are but if you take each question one at a time and answer it it really isn't that difficult. Chris And Mike Dodge H.O.R.S.E. Rescue and Sanctuary http://www.geocities.com/rainforest/1080 Date: Mon, 13 Jul 1998 10:24:49 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: EQ-ResQ: CLASS: Non-Profit/Incorp (NY) Still forwarding pertinent past notes (Lynda's no longer on the list, btw)... From: Ohrevlon@aol.com Date: Thu, 18 Jun 1998 13:42:38 EDT To: equinerescue@MyList.net, epona@concentric.net Subject: Re: EQ-ResQ: CLASS: Incorporation/Non-Profit Volunteer? << C'mon folks - you don't have to be an attorney to write out how you went through the incorporation and/or Non-profit procedure and answer a few questions about it. You can put a disclaimer on every post you write that it doesn't constitute legal advice. Pat - It was under the wrong header - sorry << The IRS non-profit publications say that you have a year after your incorporation date in which to submit your non-profit application. This would lead me to believe that I should incorporate first, file for non-profit after. However, I have been told that the best way to do it is to file for non-profit first and then incorporate. How does that work??? We incorporated first then filed for non-profit status. Folks - if you are seriously doing this consider hiring a lawyer and CPA to do your filings (that is how we did it). Now, I have heard of those that do it themselves (and I know) how much it costs. For us, the entire tab came to $1,200. There are those that will say, well, that is $1,200. less that I have to help the horses'. True, to some extent. The benefits are that a professional has completed the applications- someone familiar with the process - and there is recourse - someone to go back to - if there are problems. If you can afford to hire professionals - *think about what you are doing* When you are dealing with horses - $1,200. can go really fast. If you do not have alot of money - you may be setting yourself up for a disaster. If you do not fillout the forms right and the IRS comes back to you in 3 years, after you have been collecting money and telling people to deduct it from their taxes...........Imagine the possiblity for disaster. Sorry for being a downer - but, if nothing else - you need to be realistic in your endeavors if they are to succeed. Lynda NY Date: Mon, 13 Jul 1998 10:26:10 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: EQ-ResQ: CLASS: Non-Prof/Incorp Forms? Still sending old notes.... From: "Bill Adams" To: , "Pat Calloway" Subject: RE: EQ-ResQ: CLASS: Next Class? Date: Thu, 18 Jun 1998 06:57:54 -0400 > >How to get what forms...and which to fill out first ;-) > >Donna > > But which forms? There are SO many. Personally, I need some advice on which incorporation and non-profit forms to complete and in what order. The IRS non-profit publications say that you have a year after your incorporation date in which to submit your non-profit application. This would lead me to believe that I should incorporate first, file for non-profit after. However, I have been told that the best way to do it is to file for non-profit first and then incorporate. How does that work??? Elizabeth Adams Lexington KY Date: Mon, 13 Jul 1998 10:20:52 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: EQ-ResQ: CLASS: Non-Profit/Filing (OH) Here are some notes that were posted to the list recently about filing: From: Janis.Comstock-Jones@ecr.net To: equinerescue@MyList.net Date: 18 Jun 1998 13:53:26 EDT Subject: EQ-ResQ: CLASS: Incorporation/Non-Profit Volunteer I've never taken an organization through all the steps, but I can contribute a little bit . I've heard the group should get non-profit status in the state first, then with the feds. This makes no sense to me, as I can't understand the advantages of not doing it all at once. If it's an incentive for donations, as well as to get a non-tax status, I'd think the fed level is the more desireable, and it should be done at the same time. If someone can comment on that, I'd appreciate it. Ohio has a free publication with the state rules, and it's very easy to read and understand. To me, the hardest thing is rounding up three trustees! Incorporation is not necessary in Ohio, according to this booklet, but it gives instructions for both kinds of status. I've been in many non-incorp. not-for-profits, and I'd say the majority have been long-established clubs where the officers have failed to keep up with the laws, forgotten they are supposed to submit reports, don't know where the by-laws are or when they were last revised, and the membership doesn't know they even have by-laws. I served as secretary on one of these, and it was a nightmare, trying to get the members to understand that this stuff is *important*. I've also held offices, been a director, etc., on well-run non's, and the reports are not so hard to complete, but the officers must understand that good records are important. In my professional life, until I formed my own business, I worked for one private college, one state Uni, one Community College, one JVS, county government, and two of the largest non-profits in the US (one is the largest in the world), as well as being a volunteer for many others, so I've soaked up a lot of non- and not-for-profit mundane tasks, just haven't gone through the process of gaining tax advantage status. Please, someone who has, share with us? Janis (SPHO--Ohio) http://www.ecr.net/gallifry/spho.htm Date: Mon, 13 Jul 1998 11:54:03 -0700 To: EquineRescue@MyList.net From: Mike Dodge Subject: EQ-ResQ: Non-Profit Incorporating and receiving tax exempt 501(c)(3) is the easy part but does not guarantee that your organization wiil succeed. I'm sort of playing devil's advocate here because people considering starting such an organization need to be aware of what the IRS is going to want and that just by becoming a non-profit donors are not going to be coming out of the woodwork to hand you money. We have been rescueing horses for the last five years. The first three years as self funded. We then incorporated in 1996 and received our tax exempt status in 1997. It would have been cleaner and neater to have had the services of an attorney and CPA but finances just wouldn't allow it so I waded through it with the help of a very thick book entitled "The California Non-Profit Corporation Handbook". It took a couple of months to do all the paperwork including the Articles of Incorporation and the By-Laws. Getting through the state was fairly easy. When filing for federal status they want you to include an endorsed copy of your articles and the letter from the state granting tax exempt status before they will consider it. We can help anyone with the paperwork but we can't help tp select an effective Board of Directors. After two years we are still working on our board. We at first put two members on because we thought they would help. It turns out that they thought they could run the organization better than we could and attempted a hostile takeover which didn't work. After that failure they contacted the District Attorney's off ice and complained about misappropriation of funds. They didn't like the way we spending the money on the horses I guess. Anyway, the DA's office investigated which they have to do and found no basis for the complaint. I guess what I am getting at is screen your prospective board members carefully. In fact you would be better off by not putting any rescuers on your board at all. Select people who would be active in the community. Attorneys, vets, CPA's are all excellent choices. Building a board is the tough part other than fundraising. Which brings us to the next important part of having a rescue. Money. This battle is neverending. It seems that we always have our hand out. We contact companies for sponsorship, we write grants, hold yard sales, auctions etc, etc. Our problem is that we have a small board and everyone works full time. Ideally, if we could find someone who doesn't work and doesn't mind asking for money then we could use their services but not necessarily put them on the board. I will guarantee that if you don't have funding the organization won't work. If, and it's a big if, you were able to line up potential donors in advance then you know you will have the funds to operate. Last fiscal year 27% of our funds were eaten up by medical costs. The vets don't give us much of a break. Don't expect them to. They have to earn a living too. Hay producers won't help either. It all boils down to how much effort you put into fundraising. There are so many charities out there hitting everybody up for money it makes it difficult for every legitimate group trying to raise money. We don't want to sound negative but we've had alot of requests to help set up non-profits and we want everyone to realize that it's a time consuming and difficult task. Chris And Mike Dodge,Founders H.O.R.S.E. Rescue and Sanctuary,Inc. http://www.geocities.com/rainforest/1080 ICQ #6714413 "if all the beasts were gone, man would die from loneliness, for whatever happens to the beast, happens to the man" From: "Double D Equine Rescue" To: Subject: EQ-ResQ: Non-profits Date: Mon, 13 Jul 1998 20:41:10 -0400 Seeing as we're a new rescue, I'll share with everyone what we've done so far: We came up with the idea of a rescue March 29, 1998 (although it was something we always wanted to do, but after hearing some horror stories from a vet about "certain agencies" not doing their job when it came to horses, we decided that we should do something). We made real quick friends with Mike and Chris (I still owe everything to them for getting us started!). April 15 (tax day :) ) I sent out our Articles of Incorporation. ($100 for us here in PA). They were filed and approved April 20 (talk about being amazed at the speed!) June 16 I finally sent our 501(c)(3). We actually had it completed in May, but had to wait for the money. With the h*lp of a very amazing person, and the wonders of ICQ, it took about 1 hour for us to fill it out, and an hour to type it. Cost: $500. We did not go through a lawyer or CPA. (Altough we do have a lawyer and CPA on our board). I received a letter back from the feds saying that they received our application, but will take up to 120 days for us to receive our determination letter. When getting started and asking around, some people said it takes 2 years and $2000 to go non-profit.....cost us $600, 5 days to get incorporated, and 2 hours to complete our 501(c)(3) (then however long it takes for the determination letter). Debbie Double D Equine Rescue From: "Double D Equine Rescue" To: , "Pat Calloway" Subject: Re: EQ-ResQ: CLASS: Non-Prof/Incorp Forms? Date: Mon, 13 Jul 1998 20:46:08 -0400 However, I have been told that the best way to >do it is to file for non-profit first and then incorporate. How does that >work??? > We had to send a copy of our Articles of Incorporation along with our 501(c)(3), so I'd suggest incorporate first. Besides, it takes longer to get the 501(c)(3). Debbie To: equinerescue@MyList.net Date: Tue, 14 Jul 1998 00:26:26 -0400 Subject: Re: EQ-ResQ: CLASS: Nonprofit/Incorp - Questions From: lisaviger@juno.com (Lisa A Remi-Viger) I think I understand the filing process for obtaining non-profit status. Here's my question, though, that I have no idea of how to go about doing. How does one choose a board of directors? How many people have to be on it? Do they have to be nearby and involved hands-on in the rescue organization other than the business side? Are regular meetings needed and how often? Is it a good or bad idea (or even allowed) to have relatives on the board (my mother isn't crazy about our horses, but she knows how to keep records and handle finances better than anyone I know.....especially me!)? So what positions exactly would a board of directors consist of? And should one have a board of directors in place before filing any incorporation or non-profit forms? Lisa Viger Cricket (12 yo STB gelding) and Sadie (20+ ASB mare) "Men have forgotten this truth," said the Fox. "But you must remember. You are responsible, forever, for what you have tamed." Date: Mon, 13 Jul 1998 18:39:46 -0700 To: equinerescue@MyList.net, lisaviger@juno.com (Lisa A Remi-Viger) From: Mike Dodge Subject: Re: EQ-ResQ: CLASS: Nonprofit/Incorp - Questions At 12:26 AM 7/14/98 -0400, you wrote: > I think I understand the filing process for obtaining non-profit >status. Here's my question, though, that I have no idea of how to go >about doing. How does one choose a board of directors? How many people >have to be on it? Do they have to be nearby and involved hands-on in the >rescue organization other than the business side? Are regular meetings >needed and how often? Is it a good or bad idea (or even allowed) to have >relatives on the board (my mother isn't crazy about our horses, but she >knows how to keep records and handle finances better than anyone I >know.....especially me!)? So what positions exactly would a board of >directors consist of? And should one have a board of directors in place >before filing any incorporation or non-profit forms? > Lisa, You got right to heart of the matter. We have had the most problems with our board, other than fundraising. The IRS is going to require at 51% non-interested persons on your board. Non-interested means not related in any way. For example if two of your board members are related such as you and your mother then you will need 3 additional members for a total of five. I would suggest you stay small with no more than seven members. You will have to carefully pick them. Stay away from people that want to rescue as well so that you won't lose control of your board and get booted out after all your hard work. Find people who are animal lovers and are looking for a cause but screen them carefully. I might even suggest a probabition period of 90 days to see how they perform. Your By-Laws will state how often and on what day you will have meetings. You might want the second Tuesday of each month for example. That is up to you. Get yourself a copy of "Robert's Rules of Order" which governs parlimentary procedure or how your meetings are conducted. Any regilar meeting of a board is considered to be in "executive Session" which translates to secrecy. In other words, if a member present at the meeting discusses with outsiders the nature and content of your meetings that member maybe censured, fined or expelled. The Roberts Rules also tell you how to conduct meetings and how to stick to an agenda. Applying for and receiving your tax exempt status is the easy part. All the superflous material that goes with the incorporation and the direct daily operation of the rescue is another matter altogether. Having a secretary well versed in non-profit requirements is invaluable Get yourself a bookkeeper to act as treasurer. You need to account for every dime you take in and every one that you spend. I can't begin to tell you how many times our treasurer or CFO has saved our butts. You won't have time to do it yourself. Delegation is a key to a successful operation. Hope this answers some of your questions. Chris And Mike Dodge,Founders H.O.R.S.E. Rescue and Sanctuary,Inc. http://www.geocities.com/rainforest/1080 ICQ #6714413 "if all the beasts were gone, man would die from loneliness, for whatever happens to the beast, happens to the man" From: "Double D Equine Rescue" To: Subject: Re: EQ-ResQ: CLASS: Nonprofit/Incorp - Questions Date: Tue, 14 Jul 1998 09:03:30 -0400 > I think I understand the filing process for obtaining non-profit >status. Here's my question, though, that I have no idea of how to go >about doing. How does one choose a board of directors? How many people >have to be on it? We have 5 people on our board: myself (President), my husband (Vice-President), Sharon (Director/Fund raising Director), our "legal advisor" (Secretary, plus she keeps by butt out of jail), and our legal advisor's CPA (Treasurer). I think we just got "lucky" with ours. They all just seemed to fall into place, and we haven't had a single problem so far. Do they have to be nearby and involved hands-on in the >rescue organization other than the business side? Are regular meetings >needed and how often? According to our Bylaws, we're going to be having a set meeting twice a year, but will be having "informal" meetings as needed. >directors consist of? And should one have a board of directors in place >before filing any incorporation or non-profit forms? You have to have your board before filing. You have to provide all that info. But you can always change it. When we did our Articles, we didn't have our set board yet. So I "filled in the blanks", now have to send a letter to the state changing it. > > Debbie Double D Equine Rescue Date: Tue, 14 Jul 1998 22:59:40 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: Re: EQ-ResQ: CLASS: Non-Profit Book At 10:22 AM 7/13/98 -0700, Pat Calloway wrote: >From: "Double D Equine Rescue" > >For those of you wanting to start a non-profit, I highly recommed a book I >got. It tells everything step-by-step. Helped us a whole bunch! It's called >"How To Form A Nonprofit Corporation In All 50 States" It's $39.95 and the >phone number to order it is 1-800-992-6656 > Are there any other books, websites, etc that folks have found helpful in setting up non-profits or corporations? I have a few useful websites on the Equine Rescue Mailing List Home Page under the Resource section. Legal and Tax Answers for Nonprofit Organizations has downloadable IRS forms, steps and basics in forming your nonprofit and more. Looks very useful - lots of info on their FAQ pages. http://www.exemptlaw.com/ Incorporate Online - a commercial website that offers their services in filing, but also has lots of FAQs and useful links: http://www.exemptlaw.com/ -- Here's a new one, not yet on the EQ-ResQ HP that looks useful: The Small Business Advisor. Yep, it's a non-profit, BUT this has lots of useful info as far as your basic business stuff and may be useful: http://www.isquare.com/ --- Pat Calloway, Equine Rescue/Creatures Listowner epona@concentric.net (AZ) http://pages.prodigy.com/equinerescue/home.htm http://pages.prodigy.com/equinerescue/creature.htm From: Janis.Comstock-Jones@ecr.net To: equinerescue@MyList.net Date: 15 Jul 1998 09:39:08 EDT Subject: EQ-ResQ: Non-Profit Filing Fee Question For those of you who have gone through the IRS application...have any of you ever heard or seen an explanation for why the filing fee is so much? My opinion is that $500 is simply too much for the feds to charge for this process, since the whole point is to establish a group who meet requirements to provide a beneficial service...other reforms in the federal structure over the past 15 years have shifted a lot of weight from gov't programs to non-profits, and I personally don't see what the groups are getting in return for the filing fee. I'm not looking to start a big gripe here, but it looks like an area that might be updated, especially in light of other IRS changes in recent news. The applicant supplies all the info, and I'd guess the main work done at the fed end is someone checks out the application and someone else does a bit of data entry. If anyone can explain some higher level of value for the fee/return on investment, I'll stop worrying about it . thanks, Janis (SPHO--Ohio) http://www.ecr.net/gallifry/spho.htm Date: Wed, 15 Jul 1998 14:44:42 -0700 To: equinerescue@MyList.net, Janis.Comstock-Jones@ecr.net From: Mike Dodge Subject: Re: EQ-ResQ: Non-Profit Filing Fee Question At 09:39 AM 7/15/98 EDT, you wrote: >For those of you who have gone through the IRS application...have any of >you ever heard or seen an explanation for why the filing fee is so much? > My opinion is that $500 is simply too much for the feds to charge for >this process, since the whole point is to establish a group who meet >requirements to provide a beneficial service. Janis, I can't think of a logical why the fees are so high unless it is to keep the less than serious people out of the game. Last year the fee was $465. I don't think we'll ever get the IRS to give an accounting of where the money goes. Chris And Mike Dodge,Founders H.O.R.S.E. Rescue and Sanctuary,Inc. http://www.geocities.com/rainforest/1080 ICQ #6714413 To: equinerescue@MyList.net Date: Thu, 16 Jul 1998 10:56:40 -0400 Subject: Re: EQ-ResQ: CLASS: Non-Profit Qs From: lisaviger@juno.com (Lisa A Remi-Viger) Are we still discussing non-profits? Here's how I understand the process of establishing one so far. 1. Establish the address of rescue 2. Get a board of directors in place 3. Incorporate 4. Establish a separate bank account for the non-profit. 5. File for state non-profit status 6. Start collecting all those donations (ha, ha, just thought I'd be funny :) 7. File for federal non-profit status Now I have some more questions, since we're actually becoming very serious about the whole thing: First, do I have the basic timeliness of establishing a non-profit correct? Can the address of the non-profit be a PO box? When choosing a board of directors, is it wise to possibly include your own vet and farrier as board members? Would that be considered a conflict of interest since they would be doing work on any rescues and getting paid for their services? I feel it would be advantageous to have people like that on a board since they would understand the cost of services rescues require and not be likely to quibble about those costs, not to mention the value of their professional opinions and experience. But they would also be paid for their services by the non-profit. Good or bad? Conflict of interest? What is the minimum number of formal, official board meetings that is best? Once the non-profit status, board, etc. is set, and the facilities in place, what is the best way to go about establishing a good rapport with local humane societies and other agencies of that sort who may need the services of the rescue? As far as I know, there are no local facilities for large animal seizures in our area. How should an equine/animal rescue go about checking out allegations of abuse/neglect (in addition to photo/video documentation, witness statements, etc)? Is there anything else that should be done when a rescue learns of an abuse/neglect situation? Should they even get involved at all or simply refer those cases (and the information) to the agency responsible (humane society? Police?)? What positions should the board be comprised of? Director, Secretary, Treasurer and Trustees? Or am I missing a necessary position? If lucky enough to get volunteers to help with hands on work, how is that time accounted for and what kind of receipt would be given to a volunteer? I'm assuming their time is tax deductible as any other type of donation. Am I wrong? If accepting donations of horses or other animals, how is the value determined? As I understand it, any donation of a horse can be valued up to $3,500 without an appraisal. But of course, the horse would most likely not be worth $3,500 if sold. So how does one make a decision on value? What about the donation of other animals? What is the best way to establish ties with local feed stores in order to possibly receive donations of goods? For example, our local feed/tack store carries vaccines. However, they don't all sell and they are stuck with vaccines which are *close* to but not over their expiration date and end up throwing them all away. I'm sure they would much rather donate these kinds of things to a rescue, and perhaps other goods. Of course, they know hubby and I since we're always in there spending money :). But how does one establish ties with these places as a rescue? What other businesses are likely to donate goods to a rescue? And what about individual hay growers who may be willing to donate hay.....how would that be valued and what kind of receipt would be given to the donator? Have many of the established rescues used regular membership fees as a source of funds? I realize operating a rescue is going to require a good portion of our own disposable income (is this tax deductible?) and don't ever expect to break even....much less have it be anything but truly *NON-profit.* However, I'd like to do it as efficiently and with as little of our own income going towards it. I would give all my own income to run a rescue, but that isn't feasible for anyone. I do feel a rescue has to be at least borderline fiscally sound to operate successfully (and that "ain't" happenin' with our small amount of disposable income :). OK, I realize I've just asked enough questions to fill a book. If anyone has the time to answer some of them I'd be greatly appreciative :). Lisa Viger Date: Thu, 16 Jul 1998 22:15:11 -0700 From: Gail Garrett To: "equinerescue@MyList.net" Subject: EQ-ResQ: CLASS: Non-Profit Qs I might be way off on this, but isn't the first piece of paper you mail out the Request for Name Availability? I was under the impression that you have to do this first and then you can move on to the Articles, etc. I mean, how do you fill out all that dadblasted paperwork if you don't have a registered name? Maybe this is a California thing? I just sent a letter requesting name availability with 2 names listed in case the first one was already registered. I enclosed a $10.00 filing fee. -- Gail Garrett-Southern California whoanellie@earthlink.net From: "Double D Equine Rescue" To: Subject: Re: EQ-ResQ: CLASS: Non-Profit Qs Date: Fri, 17 Jul 1998 08:17:33 -0400 >I might be way off on this, but isn't the first piece of paper you mail >out the Request for Name Availability? We didn't have to do that here in PA. > Maybe this is a California thing? Must be another stupid CA thing :) (Sorry, but I lived there for 21 years, and don't care much for the place!) Date: Sun, 19 Jul 1998 11:08:11 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: EQ-ResQ: CLASS: Nonprofit/Incorp We'll wrap up the class on incorporating and filing for non-profit status today. Does anyone have any additional questions or comments to add? From: "Bill Adams" To: , "Gail Garrett" Subject: RE: EQ-ResQ: CLASS: Non-Profit Qs Date: Sun, 19 Jul 1998 15:46:59 -0400 > I might be way off on this, but isn't the first piece of paper you mail > out the Request for Name Availability? I was under the impression that > you have to do this first and then you can move on to the Articles, > etc. I mean, how do you fill out all that dadblasted paperwork if you > don't have a registered name? Maybe this is a California thing? > > I just sent a letter requesting name availability with 2 names listed in > case the first one was already registered. I enclosed a $10.00 filing > fee. Apparently the Name Availability does vary a bit from state to state. Here in KY you can call to check whether or not your organization's desired name is already in use, and you can check for availability of a DBA. Once you have established that the name is available, you complete a form and pay $50 to register your name. CA's $10 fee is looking pretty reasonable! Elizabeth Adams Lexington KY From: "Bill Adams" To: , "Lisa A Remi-Viger" Subject: RE: EQ-ResQ: CLASS: Non-Profit Qs Date: Sun, 19 Jul 1998 16:11:13 -0400 Lisa had LOTS of questions (smile): > Are we still discussing non-profits? > Here's how I understand the process of establishing one so far. > 1. Establish the address of rescue > 2. Get a board of directors in place > 3. Incorporate > 4. Establish a separate bank account for the non-profit. > 5. File for state non-profit status > 6. Start collecting all those donations (ha, ha, just thought I'd be > funny :) > 7. File for federal non-profit status > > Now I have some more questions, since we're actually becoming very > serious about the whole thing: > First, do I have the basic timeliness of establishing a non-profit > correct? I think a couple of changes in the order of doing things would help: 1. Get a board of directors in place. 2. Establish the address of the rescue 3. Establish a bank account 4. File for state non-profit status 5. Incorporate 6. File for Federal non-profit status 7. Watch the money roll in!! > Can the address of the non-profit be a PO box? I think the forms will allow for addresses for physical location of the group and the mailing address for the group. If you don't want everyone and his brother to know your physical location, I would strongly suggest going with a PO box for your mailing address. It will also help with donations as people will be less inclined to think that you are using their money for yourself than they would if they were mailing it to your home address. A PO box will also reduce the likelihood of mailed funds being stolen from your mailbox. > Once the non-profit status, board, etc. is set, and the facilities > in place, what is the best way to go about establishing a good rapport > with local humane societies and other agencies of that sort who may need > the services of the rescue? As far as I know, there are no local > facilities for large animal seizures in our area. This is easy. Most humane societies are desperate for places to house large animals. I would suggest calling on the humanes in person, if possible, and tell them of your idea and ask them how you can be of help to them. If they have animal cruelty officers, get to know these people. Invite them to visit your facility to see how you plan to care for the horses (maybe have an Open House with agents, exec directors and so forth from all the local humanes as your guests). Demonstrate your horse knowledge, your interest in how you can help the humanes, your knowledge of animal cruelty laws in your state, how you plan to fund your operation. > How should an equine/animal rescue go about checking out allegations > of abuse/neglect (in addition to photo/video documentation, witness > statements, etc)? Is there anything else that should be done when a > rescue learns of an abuse/neglect situation? Should they even get > involved at all or simply refer those cases (and the information) to the > agency responsible (humane society? Police?)? This is a tricky thing and will probably differ by situation and by state. In the KY horse seizures of this spring, the local humanes and every other level of officialdom that may have had some ability to resolve the situation had been contacted; these people/organizations were unable to help for one reason or another. At that point, the individual agent (Vickie Coomber) had to step in to make the seizure, which is valid under KY state law. You can NEVER have too many photos, nor too many affidavits from witnesses. > If accepting donations of horses or other animals, how is the value > determined? As I understand it, any donation of a horse can be valued up > to $3,500 without an appraisal. But of course, the horse would most > likely not be worth $3,500 if sold. So how does one make a decision on > value? What about the donation of other animals? It is my understanding that the person making the donation determines the dollar amount of the donation's value. If the value is over a certain amount, it is the responsibility of the person making the donation to have a written appraisal of the donated item/horse's value prior to donation. > What is the best way to establish ties with local feed stores in > order to possibly receive donations of goods? For example, our local > feed/tack store carries vaccines. However, they don't all sell and they > are stuck with vaccines which are *close* to but not over their > expiration date and end up throwing them all away. I'm sure they would > much rather donate these kinds of things to a rescue, and perhaps other > goods. Of course, they know hubby and I since we're always in there > spending money :). But how does one establish ties with these places as a > rescue? What other businesses are likely to donate goods to a rescue? And > what about individual hay growers who may be willing to donate > hay.....how would that be valued and what kind of receipt would be given > to the donator? Talk to the store owners or managers and explain what you are doing. Ask them to donate those vaccines that are close to expiration date. Ask people to donate hay and feed. Ask the store managers if you can post a notice publicly that your rescue needs certain items and asking that the store's patrons add an additional wormer to their shopping list for the day (the store would then hold the item for you, along with the name and address of the person who made the purchase so that you can send them a receipt for the tax deduction). In my experience, feed stores and hay growers have been so thoroughly disgusted by the pictures of the rescued horses that they have gone way above and beyond what I would have expected in making donations. Most importantly, though, is to thank each of these stores or hay growers publicly! > I realize operating a rescue is going to require a good portion of > our own disposable income (is this tax deductible?) and don't ever expect > to break even....much less have it be anything but truly *NON-profit.* > However, I'd like to do it as efficiently and with as little of our own > income going towards it. I would give all my own income to run a rescue, > but that isn't feasible for anyone. I do feel a rescue has to be at least > borderline fiscally sound to operate successfully (and that "ain't" > happenin' with our small amount of disposable income :). Your own income that is devoted to the rescue is tax deductible if you run it through the organization. I would suggest making out a check from your personal bank account which can be deposited into your organization's account, and then paying for the items or services from the organization's account. Don't forget to write yourself a receipt! Also, just because an organization is non-profit doesn't mean that it doesn't have to watch the bottom line. You can't rescue horses if you don't have the money to support them. I didn't address any of the questions with which I have absolutely no experience; I'll leave that to someone who has already been there, done that. I hope I am not misinforming you on anything; I assure you that I am not qualified to offer legal or financial advice (is that good enough for a disclaimer?). This is just what I have found to be true in my own situation. Best of luck! Elizabeth Adams Lexington KY From: SJCECCHINI@aol.com Date: Sun, 19 Jul 1998 22:37:33 EDT To: equinerescue@MyList.net, epona@concentric.net Subject: Re: EQ-ResQ: CLASS: Nonprofit/Incorp Who or where would I contact to find out more information about filing in my state? Meaning - do I contact an attorney or go to the library or town hall or what? I'm sure I could do it myself if I knew what direction to start in. Thanks, Jackie From: "Bill Adams" To: Subject: RE: EQ-ResQ: CLASS: Nonprofit/Incorp Date: Sun, 19 Jul 1998 22:52:27 -0400 Jackie wrote: > Who or where would I contact to find out more information about > filing in my > state? Meaning - do I contact an attorney or go to the library > or town hall > or what? I'm sure I could do it myself if I knew what direction > to start in. Jackie, I started by looking in the government phone listings for the Department of Revenue and the Department of Commerce. They can give you lots of great information about how to incorporate and how and where things need to be filed. I would also strongly recommend that you get one of those "How to Incorporate in (your state)" books as they will save you a lot of time and trouble. You can incorporate on your own fairly easily and thereby save yourself several hundreds in attorney fees. Elizabeth Adams Lexington KY Date: Sun, 19 Jul 1998 20:05:42 -0700 To: equinerescue@MyList.net, SJCECCHINI@aol.com From: Pat Calloway Subject: Re: EQ-ResQ: CLASS: Nonprofit/Incorp At 10:37 PM 7/19/98 EDT, SJCECCHINI@aol.com wrote: >Who or where would I contact to find out more information about filing in my >state? Meaning - do I contact an attorney or go to the library or town hall >or what? I'm sure I could do it myself if I knew what direction to start in. > One of the links that I gave earlier has listings for each state that gives who to contact about incorporating which would be your first step. It's at: http://www.isquare.com/ Click on State info in the frame to the left, then when that comes up, click on state offices for incorporation information. That'll bring up an address and phone number for each state. Calling them would be my first step. I also would suggest that purchasing one of the books available that spell out the steps to take in filing for incorporation or non-profit status would be useful. And you can always post on this list and ask who has filed in your state and if they would be willing to help you though any bumps. There are a few links under the Equine Rescue Mailing List Resources Page under Charities/Non-profits that may be useful as well: http://pages.prodigy.com/equinerescue/resource.htm Eventually I'll have the notes from this particular class session up under the Archives. The other two classes are already up there (basics and adoptors). From: "Douglas L. Peters" To: , "Pat Calloway" Subject: Re: EQ-ResQ: CLASS: Nonprofit/Profit Date: Sun, 19 Jul 1998 23:32:40 -0700 Forgive me if I'm too far off topic here. Is it legal to run a for profit business (say boarding or lessons) on the same property that your nonprofit rescue is located on? Nicole Date: Mon, 20 Jul 1998 00:03:53 -0700 To: equinerescue@MyList.net, "Douglas L. Peters" From: Pat Calloway Subject: Re: EQ-ResQ: CLASS: Nonprofit/Profit At 11:32 PM 7/19/98 -0700, Douglas L. Peters wrote: > >Forgive me if I'm too far off topic here. >Is it legal to run a for profit business (say boarding or lessons) on the >same property that your nonprofit rescue is located on? Nicole > It's a good question. My GUESS (not a lawyer or accountant) is that you could, but you better be very, very careful about keeping your accounts (business, non-profit & personal) separate and how you file your taxes. Good record keeping would definitely be the key. Taxes would be where you could run into problems. Date: Mon, 20 Jul 1998 05:54:59 -0700 To: equinerescue@MyList.net, "Douglas L. Peters" From: Mike Dodge Subject: Re: EQ-ResQ: CLASS: Nonprofit/Profit At 11:32 PM 7/19/98 -0700, you wrote: > >Forgive me if I'm too far off topic here. >Is it legal to run a for profit business (say boarding or lessons) on the >same property that your nonprofit rescue is located on? Nicole > There is nothing against the law about a non-profit making a profit as long as that profit does NOT benefit any officer or director of the corporation. That is where the IRS is especially unforgiving. The United Way got into some trouble some years ago because some of the officers received huge salaries. Many if not most charities here in California run thrift stores to help finance the non-profit organization. Boarding or lessons are a good way to keep a horse rescue on an even keel and makes them less dependent on donations which can be sporatic. It's OK for a non-profit to make money in ways totally unrelated to your non-profit purposes and still not lose your non-profit status. The amount of money you make this way must limited and for many groups may not exceed 1/3 of the total receipts of the corporation. Passive income such as investments, rents, royalities, interests,etc. are allowable and non-taxable in many cases. Again the 1/3 rule applies to certain but not all groups. From: Janis.Comstock-Jones@ecr.net To: equinerescue@MyList.net Date: 20 Jul 1998 10:13:34 EDT Subject: Re: EQ-ResQ: CLASS: Nonprofit/Profit HO>>Forgive me if I'm too far off topic here. HO>>Is it legal to run a for profit business (say boarding or lessons) on the HO>>same property that your nonprofit rescue is located on? Nicole HO>> HO>There is nothing against the law about a non-profit making a profit as long HO>as that profit does NOT benefit any officer or director of the corporation. It is a good practice to refer to those as "revenues" and "cost recovery," to indicate that the funds go back into the pool for "goal achievement." Perhaps Nicole was not meaning that the non-prof would be doing these activities, though...if so, I also wonder how other groups have handled the issue. I'm sure it's legal, for instance, for Acme Rescue to consist of a barn that was built with donated materials on Sue Smith's property, provided all the right documentation is on hand, while Sue is also operating her CPA office in her home, and also using space in her home for Acme records, Acme phone calls, etc. I'd think the key, again, is tracking exact use and documenting it well. What sort of documentation is recommended for the difference between the barn of donated materials and the land Sue bought for her own use but allowed that barn, pasture, etc., to share? Maybe a $1 lease for the lifetime of her ownership? Ideas? Janis (SPHO--Ohio) http://www.ecr.net/gallifry/spho.htm Date: Mon, 20 Jul 1998 10:37:28 -0400 From: Cris May To: equinerescue@MyList.net Subject: Re: EQ-ResQ: CLASS: Nonprofit/Profit Yes, it is legal to run a for-profit business along side a not-for-profit business, but you had better keep impeccable records of where all monies go. Otherwise you will have folks asking "well, did the money I donated to buy feed go to the rescue horses, or the lesson horses, or the boarded horses." This is one of those areas where appearance really does count, so think about all possible ramifications and set ups before you do anything in this instance. Cris May Days End Farm Horse Rescue (MD) Date: Mon, 20 Jul 1998 07:55:59 -0700 To: equinerescue@MyList.net, Janis.Comstock-Jones@ecr.net From: Mike Dodge Subject: Re: EQ-ResQ: CLASS: Nonprofit/Profit >It is a good practice to refer to those as "revenues" and "cost >recovery," to indicate that the funds go back into the pool for "goal >achievement." > >Perhaps Nicole was not meaning that the non-prof would be doing these >activities, though...if so, I also wonder how other groups have handled >the issue. I'm sure it's legal, for instance, for Acme Rescue to >consist of a barn that was built with donated materials on Sue Smith's >property, provided all the right documentation is on hand, while Sue is >also operating her CPA office in her home, and also using space in her >home for Acme records, Acme phone calls, etc. I'd think the key, again, >is tracking exact use and documenting it well. What sort of >documentation is recommended for the difference between the barn of >donated materials and the land Sue bought for her own use but allowed >that barn, pasture, etc., to share? Maybe a $1 lease for the lifetime >of her ownership? Ideas? > Janis, You're definitely on the right track here. One thing I have learned is to never second guess the IRS. When you start having rescue projects on your own property, or when you have your own horses mixed in with the rescues, then you are walking a tightrope. You have to be very very careful that you as an officer or board member are NOT benefiting in any way, and that is the key. You have to keep everything separate and exact records must be kept. The IRS will let you get away with a little the first year, but after that they can come on like Attila the Hun. As long as every donation, whether it be cash, check or in kind services is recorded and all bank deposits match donations, there shouldn't be any problem. We have a good bookkeeper and she has saved our butts more than once. I can't emphasize it enough that the founders of the organization must NOT do their own bookkeeping. The control of the monies cannot be in the hands of the president, vice president, or secretary unless the secretary is also the treasurer, especially if the president and vice-president are related in any way.. Remember the 51% non-interested rule. Mike Date: Tue, 21 Jul 1998 19:51:24 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: Re: EQ-ResQ: CLASS: Nonprofit/Incorp At 11:08 AM 7/19/98 -0700, Pat Calloway wrote: >We'll wrap up the class on incorporating and filing for non-profit status >today. Does anyone have any additional questions or comments to add? Are we wrapped up on this now or would you guys like to continue it for another week? It's a big subject so I could see it going a bit longer... Date: Tue, 21 Jul 1998 21:36:57 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: EQ-ResQ: CLASS: Incorporation Steps Passing this along with David's kind permission to do so... he is not on this list, but didn't mind sharing his note... From: "P. David Sawicki" Subject: LEGAL: Steps in Incorporation/Tax Exemption Unfortunately I deleted Betsy's post on the steps to incorporation, so I can't repaet her message in this reply. While her structure was basically sound, there were several points that need clarification or were missed. Disclaimer: Based on New York State Law & Experience/Specific Requirements May Vary By State. (All costs listed are from NY/GRROWLS experience.) 1- Forming the Corporation - Critical that one looks at the law of the State you are incorporating in first. For most part will incorporate in the State you are located in, unless willing to set up a Branch" office (even as a paper shell) in another State. - Things to consider are who will be the legal incorporaters, who will be officially listed in the incorporation paper as an agent, purpose of organization & how long will the organization exist and how and under what steps will it be shut-down, if it does. Usually do not need by-laws in place, but good time to start thinking of this. - Cost of filing papers (in NY) is $75 & another $25 if want expedited service. 2- Nor mentioned is the need to get an Employee Idenification Number (EIN) from the IRS (need whether you plan to get 501-c-3 status or not. Cost -0- 3- File with IRS as a 501(c)(3) (Not charities registration as Betsy's post mentioned). - Biggest information needed are by-laws (see how-to legal books such as E-Z Legal books- Corporate Secretary which provide examples of a by-law & other form). - Projected budget for current year & next 2years if a new organization or current year & last 3 years if existing organization. - Cost- $150 if average revenue has been or projected to be $10,000 or less a year. $465 if average ggross receipts has been/projected to be more than $10,000 a year. - If approved, exemption retroactive to date of filing. However takes minimum of 4 months AFTER IRS receives to get initial feedback. Assume 6 months from time of filing. 4- With the approval of the IRS exemption you can generally get a State sales tax exemption simply with filing forms & showing proof of IRS exemption. Cost in NY -0-. Theoretically possible to get sales tax exemption without IRS but more difficult & if IRS has rejected exemption, States will follow-suit without extremely detailed information/cause. 5- Then Charities Registration (may not be required in all States), but increasing required. In NY it is done though the Department of Law (Attorney General) & cost $25 filing. Allows organization to legally solicit donations. Reporting of tax documents reqired on a yearly basis. Total cost- In $- 275. In pain & sufferring- not measurable :) A layman who knows how to read law/statutues/regulations can do this...takes time. Preferable approach is get a lawyer experienced in setting up corporations to do it for free. (Like any field of law, knowing one area does not guarantee knowing other areas.) David (psawicki@capital.net) P. David Sawicki GRROWLS-NY, Inc.; TAF, Limited; NENYGRC Date: Wed, 22 Jul 1998 08:27:41 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: EQ-ResQ: CLASS: IRS 501(c)(3) Betsy has given me permission to pass here notes along with this disclaimer: While a lawyer, I am NOT a practicing attorney and the information is not given as legal advice but, rather, as my understanding of the situation as a result of being a member of a rescue group that looked into the issue and obtained the status. Anyone planning to act on the issue should confirm these matters for themselves. From: Elizabeth Sommers Subject: CLASS: IRS 501(c)(3) wrap-up -- Part 1 To: DOG-RESCUE@APPLE.EASE.LSOFT.COM (Apologies if this is duplicate -- tried to send it last night but it hasn't apparently arrived on the list.) Back again: A bit of a very rough primer on 501(c)(3), tax exemptions, and tax deductions: 501(c)(3) status does two things for an organization: 1) it makes it exempt from taxation -- you don't have to pay tax on income that the group makes, large gifts it receives and 2) -- through reference to another part of the Internal Revenue Code, sec. 170(c) -- donations received by the organization can be deducted as charitable contributions by the donors. Only certain "charities" can qualify for this status: They have to be groups that are "organized and operated exclusively for religious, charitable, ... or educational purposes" AND they cannot participate in campaigns for candidates for political office or spend a "substantial" amount of their activities in attempting to influence legislation. (These quotes are from the statute.) (There are, as Scott noted, some ways that you can have contributions to your group be tax deductible, even if you don't have 501(c)(3) tax exempt status, and under other parts of section 501, you can be tax exempt but not entitled to tax-deductibility........ Wonnerful, ain't it? Please, if you are getting into these levels, - get an attorney! a tax attorney, in fact!) For the most of us, getting the garden variety 501(c)(3) status is all that we want and is quite enough to achieve. It *is* possible for a rescue group to get this status without hiring a lawyer and without spending large amounts of money. There are very few disadvantages to having the status: most of us in rescue are too busy and too poor to get really involved in supporting candidates for office, and because some lobbying is allowed, we are still able to speak out in support of legislation that affects our work (anti-cruelty laws, etc.). And there are LOTS of benefits. The big ones, of course, are not having to pay taxes on income (all those fund-raisers and adoption fees generate "income," you know - no matter how many unpaid bills you may have) and having donors get the advantage of the tax deduction. But there are others, such as the fact that some grant sources require that you have the status. In general, it is a very good short-hand way to say "we're legitimate - we're a *real* charity" -- which can be very important in many situations. You just have to understand how it works. (easily said, I know) So we get to questions like this: Janice Ritter 06/17/98 04:18PM writes: >>So I'm confused - if you have your 501(c)(3) status....can you charge a fee, or does it HAVE to be a donation? Can you charge a blanket fee, or can you only charge a fee that reimburses you for expenses?" Except for the limitation on political activity and keeping to the basic educational, etc. purpose of the organization, you don't HAVE to do anything. It's all a matter of choice, and assessing the risks. (Boy, don't I sound like a lawyer?) From: Elizabeth Sommers Subject: CLASS: 501(c)(3) wrap-up Part 2 To: DOG-RESCUE@APPLE.EASE.LSOFT.COM I am having *more* trouble with this! However, I didn't have part 2 come though, so I guess some of you didn't as well. Here goes another try! It will now be parts 2 and 3, because it keeps getting bounced back as too long. Anyway, this is a continuation of Part 1, discussing what to do when you collect money at the time of adoption: You can say: "We will give you this dog and you can give us a tax-deductible donation". This works most of the time because no one ever raises questions, but there are two problems: One, as we discussed this morning, is that -- IF the matter ever got to the courts or the IRS -- they may say that you don't have a true contract, since you say everything is a "freely given donation." If your conveying the dog isn't legally connected to their conveying the donation, you might be just out of luck if the check bounces or -- even more seriously -- if the adopter ties the dog out or fails to feed it. Without mutual consideration, you don't really have a contract and thus no right to get the dog back. On the other hand, under this view, all your adopters who don't bounce their checks would get almost surely be able to take their tax deduction. On the other hand --- IF the matter ever got to the courts or the IRS -- they might say that, whatever words were used, there IS a connection between conveying the dog and conveying the money. Which is good because you now probably have an enforceable contract ... but bad because you've told all your adopters that they can deduct the amount they gave you but they really aren't entitled to do that. All you can do is hope they don't get audited and that your organization isn't called to the carpet for issuing fradulent charititable receipts. (yes, it gets worse): Is it possible, you ask, for you to go to your local county court to try to get a dog back and have the judge say you *don't* have a contract, while the next week you or an adopter gets called before the IRS and their hearing officer says it *was* a contract and therefore not a donation? You bet!!!! Now the U.S. Supreme Court would have to make sense of it all if both matters got before it at the same time ..... but do you *really* want to have to "make a Federal case out of it?" Probably not -- you're a busy, poor rescuer, remember. The other approach, that my group and Diane's group has chosen, is to say "We charge a fee of $____ for the adoption of this dog. You cannot deduct that amount as a charitable contribution, because you aren't freely giving it as a donation. Of course , if you want to give us *more* than that amount, we'll be happy to write you a charitable receipt for the difference, since that is a true donation." Because you expresly exchanged the money for the dog, there is most likely an enforceable contract. The only thing that's lost is that the adopter cannot take a tax deduction for the amount of the fee. But, at least in our experience, no one has balked at paying an adoption fee because it wasn't tax-deductible. Chances are high the county court would recognize the contract and, because the extra amount was in fact freely given, the IRS is likely to say that there can be a charitable deduction for that amount. --- continued ---- From: Elizabeth Sommers Subject: CLASS: 501(c)(3) wrap-up Part 3 To: DOG-RESCUE@APPLE.EASE.LSOFT.COM ---continued from Part 2 --- The amount of the fee and the relation that is has to what you invested in the dog is really immaterial. If some artist wants to create a ring out of pure gold and sell it for $10, that's her decision - and it's still a sale. If a different artist creates a ring out of tin and some fool pays $1,000, that's also a sale. If we choose to put $500 dollars of medical care into a dog for whom we charge a $150 adoption fee (sale price) -- well, that's our choice, too. ((And so often that IS our choice, right?)) So when an adopter says, "Hey, you folks are great to have saved him from the shelter -- I want to pay the whole $500 to adopt him" the wisest response is probably: "Well, we'll only charge you the non-deductible $150 fee for the dog, but -- since you insist -- we'll accept $350 as a donation for our organization and give you a receipt for that amount." But the minute you say to the adopter of that dog, "you must to pay the cost of the medical care in order to get the dog" --- a court or the IRS might well say that the money wasn't a donation (not freely given). No more deduction for them -- and maybe charges that your group issued a fradulent charitable receipt. Simple is really best: If someone is giving you money or something of value (equipment, medical services) of their own free will, and receiving nothing but satisfaction (or maybe a little glory - "Honored Contributor" or something in the newsletter), they can deduct it as a charitable donation if you are a 501(c)(3) organization. If they *must* give you a certain sum in order to receive a dog from you, they can't deduct that amount because it wasn't a freely-given donation -- it was a sale -- but you probably have an enforceable adoption contract. And if you are a 501(c)(3) organization, you don't have to pay taxes on either the gift or the income you derived from the sale. ((All of this isn't written in stone -- nothing is -- but I think these are pretty safe, unarguable statements.)) So, despite the mental gymnastics it takes to acquire and benefit from the 501(c)(3) status, I for one believe that it is well worth it for rescue groups. Keep questions coming in on this if you like, but another topic will be posted soon. Betsy Sommers Nelms Goldens GRROWLS-NY (GR Rescue, Albany liason) http://www.capital.net/grrowls The April Fund (Member, Board of Directors) http://www.theaprilfund.org From: Janis.Comstock-Jones@ecr.net Date: 22 Jul 1998 10:39:38 EDT Subject: EQ-ResQ: CLASS: Question re: Chapters Can anyone address the issue of chapters? Specifically, if the HQ is incorporated *and* 501(c)3, is it necessary for chapters to do more than incorporate, or must every chapter file IRS forms separately? Should every chapter that is formally a part of the same organization also be incorporated within its home state, or is this optional, if they are not doing fundraising? What other variations may/may not chapters have? Janis (SPHO--Ohio) http://www.ecr.net/gallifry/spho.htm From: Janis.Comstock-Jones@ecr.net To: equinerescue@MyList.net Date: 22 Jul 1998 10:45:22 EDT Subject: EQ-ResQ: CLASS: Question re: Chapters Just want to clarify, when I asked about the chapter incorporating w/in its home state, I meant the chapter's, not the HQ's. Janis (SPHO--Ohio) http://www.ecr.net/gallifry/spho.htm From: "Douglas L. Peters" To: , "Pat Calloway" Subject: Re: EQ-ResQ: CLASS: IRS 501(c)(3) Date: Wed, 22 Jul 1998 13:40:06 -0700 or spend a "substantial" amount of their activities in >attempting to influence legislation. (These quotes are from the statute.) ---Does this mean you can't spend any time trying to influence legislation? ---If you do spend time on that cause are you going to get called on it? ---Who determines what a "substantial" amout of time is? ---If you succeed in changing legislation, is someone going to say "well since you are a 501(c)(3) and you spent X amount of time working on this project you have overstepped your boundarys and therefore none of what you have done is applicable"? ( I guess I'm a born worrier :)!) Nicole Date: Wed, 22 Jul 1998 14:31:08 -0700 To: equinerescue@MyList.net, "Douglas L. Peters" From: Pat Calloway Subject: Re: EQ-ResQ: CLASS: IRS 501(c)(3) At 01:40 PM 7/22/98 -0700, Douglas L. Peters wrote: >>or spend a "substantial" amount of their activities in >>attempting to influence legislation. (These quotes are from the statute.) You ask tough questions, Nicole. I was just passing the information along, but I'll throw in my two cents... (Disclaimer: I'm not an attorney or an accountant, nor do I play either on tv . ) >---Does this mean you can't spend any time trying to influence legislation? Nope. It says *substantial* - my *guess* is that if you were formed to *primarily* lobby for laws/changes in laws, then that's where the substantial would come in. Possibly over 50%? Have any of you 501(c)(3) rescues run into this and what has been your experience? Of course what you do on your own time, separate from the rescue efforts and (key words) NOT FUNDED by any donations to the 501(c)(3) corp should not come under this. > ---If you do spend time on that cause are you going to get called on it? Possibly. The IRS is a fearsome entity who can do pretty much as they please to whomever they please (well, US citizens and those that earn $$ in the US). >---Who determines what a "substantial" amout of time is? The $1 million dollar question... The IRS & possibly the courts. I'm not sure if there's an hour figure or percentage of income or what it is that triggers them questioning this or any other activity. Here's a link to and a partial quote of their website addressing this issue: http://www.irs.ustreas.gov/plain/bus_info/eo/exempt-req.html "A § 501(c)(3) organization may not engage in carrying on propaganda, or otherwise attempting, to influence legislation as a substantial part of its activities. Whether an organization has attempted to influence legislation as a substantial part of its activities is determined based upon all relevant facts and circumstances. However, most § 501(c)(3) organizations may use Form 5768, Election/Revocation of Election by an Eligible Section 501(c)(3) Organization to Make Expenditures to Influence Legislation, to make an election under § 501(h) to be subject to an objectively measured expenditure test with respect to lobbying activities rather than the less precise "substantial activity" test. Electing organizations are subject to tax on lobbying activities that exceed a specified percentage of their exempt function expenditures. For further information regarding lobbying activities by charities, download Lobbying Issues." I don't really speak "legalese" but this seems to be saying that they base it on $$ rather than TIME by saying this: "subject to an objectively measured expenditure test with respect to lobbying activities rather than the less precise "substantial activity" test." Confusing, isn't it? That's why most folks will need an attorney to at least answer some of the questions. I think most folks can probably handle *most* of the paperwork, but a consultation with an attorney probably should be on the list of things to do and in the budget. >---If you succeed in changing legislation, is someone going to say "well >since you are a 501(c)(3) and you spent X amount of time working on this >project you have overstepped your boundarys and therefore none of what you >have done is applicable"? I don't know if that has ever happened. I think the best thing for 501(c)(3)entities to do would be to get themselves the advice of a darned good tax attorney/accountant that thoroughly understand the applicable state and federal laws that apply to that particular client. > ( I guess I'm a born worrier :)!) Nicole Are you a Capricorn by any chance? Here's a bit more useful stuff if you (Nicole or whomever) want to do some reading/research and let us know what you find out. Here's a link to the ERNet's page that breaks down 501(c)(3) info by state: http://equinenet.org/ernet/statenon.html and here's what Uncle Sam has to say about it in general: http://www.irs.ustreas.gov/prod/bus_info/eo/ This one also has a step-by-step walk though of the process that appears VERY useful. Lots is in Adobe Acrobat, but you can download the reader for that and use it very easily to read the documents: http://www.adobe.com/prodindex/acrobat/readstep.html or http://www.adobe.com/supportservice/custsupport/download.html Date: Wed, 22 Jul 1998 15:42:32 -0700 To: equinerescue@MyList.net, Pat Calloway From: Mike Dodge Subject: Re: EQ-ResQ: CLASS: IRS 501(c)(3) At 02:31 PM 7/22/98 -0700, you wrote: >At 01:40 PM 7/22/98 -0700, Douglas L. Peters wrote: > >>>or spend a "substantial" amount of their activities in >>>attempting to influence legislation. (These quotes are from the statute.) > Everybody is spending alot of time wondering what "sustantial" refers to. There are several questions on the IRS application asking about lobbying and are you planning to affect legislation. Answer them all "NO" or your application will be rejected. Guaranteed. I was honest and told them I would like to see some of the humane laws changed. Wrong answer. Our initial application was rejected and it took us several more months of going back and forth on the telephone and faxing to convince them that we were not going to spend any money lobbying. What you do as individuals is one thing but what you do as a non-profit is another matter altogether. I was even nervous signing the CA Slaughter Initiative. Do not, repeat do not plan on spending any time lobbying if you plan on keeping your c-3 status intact. I believe a non-profit that is planning any lobbying activities falls under 501(c)(4). Mike Date: Sat, 25 Jul 1998 04:27:10 -0500 To: equinerescue@MyList.net From: dixie@mail.utexas.edu (Dixie Davis) Subject: EQ-ResQ: non-profits: volunteer time Lisa asked: If lucky enough to get volunteers to help with hands on work, how is that time accounted for and what kind of receipt would be given to a volunteer? I'm assuming their time is tax deductible as any other type of donation. Am I wrong? Speaking as a volunteer for several non-profit groups (battered women's shelter, rape crisis center, and a runaway hotline) but NOT as a lawyer or tax accountant, I can say that I get *no* tax break for the *time* I put into volunteer work. Essentially, my time is worthless, as far as a tax deduction is concerned. However, I believe I could deduct reasonable expenses (gas and wear and tear on my vehicle) to get to and from my volunteer jobs. The groups I volunteer for do keep very close track of the number of hours that volunteers put into it, though, because this helps them in their fundraising drives. Of course, these 3 (rape crisis, domestic violence, runaway teens) all get some local/state/federal grants (I don't know all the details of where the money comes from, but they get some government aid, even though they are not *funded* by or run by the government.) So racking up volunteer hours may help there. But it could also help you. If you say to a potential donor: "We had 12 volunteers who put in 156 hours of work last month to save these horses, and several horses have made significant progress as a result. Could you donate x amount, or so many bales of hay, to our cause?" ---- this lets a person know that you're serious, that other people are serious, that you're not just looking for free hay. If you are a tax-exempt non-profit, then any in-kind donations can be written off the other folk's taxes. As far as fair market value of a rescue horse, you would either have to take the average price at auction, or you could figure some other fair market value of the horse for your area. You might need to substantiate this, however, so if you claim a value well above slaughter price, then keep some records of what other horses in your area are selling for (copies of classifieds with the date they ran, or any other documentation you can think of---flyers of horses for sale) to show a valid basis on which you figure the value of each horse. Date: Sat, 25 Jul 1998 03:34:39 -0700 To: equinerescue@MyList.net, dixie@mail.utexas.edu (Dixie Davis) From: Mike Dodge Subject: Re: EQ-ResQ: non-profits: volunteer time >As far as fair market value of a rescue horse, you would either have to >take the average price at auction, or you could figure some other fair >market value of the horse for your area. You might need to substantiate >this, however, so if you claim a value well above slaughter price, then >keep some records of what other horses in your area are selling for (copies >of classifieds with the date they ran, or any other documentation you can >think of---flyers of horses for sale) to show a valid basis on which you >figure the value of each horse. > I have to take exception to this one part of Dixie's post. We never put any value on a donated horse. Any value perceived is strictly that of the donor. We have them write in a value and initial it that value. That way, if and when the IRS does an audit the donor will take the heat and must provide the proof of value, not the rescue. You can make a recommendation but the donors don't always follow it. Donors tend to inflate the value since they are getting the write-off. We merely report them as in kind services. Mike Date: Sun, 26 Jul 1998 17:30:20 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: EQ-ResQ: CLASS: Nonprofit/Incorp Any more questions/comments/input on Incorporating and filing for Non-profit status? We ran this one for two weeks since it was a pretty interesting class with lots of good discussion and information. Soon as I can get the notes edited, I'll get it up on the Equine Rescue Mailing List Home Page so that you can read/download/save if you like. The Class for the week of 7/27 will be announced sometime later today or sometime tomorrow. From: "Double D Equine Rescue" To: Subject: EQ-ResQ: 501(c)(3)'s Date: Thu, 30 Jul 1998 20:35:31 -0400 Since there's been a lot of talk this past month about non-profits and 501's, I thought I'd share this. I mailed out our application June 16 (Mike Dodge helped us fill it out). We did not have an attorny or anyone do it (just Mike). Total cost was $500.32 ($500 for the application, $.32 for the stamp, I didn't figure in the cost of the envelope). I called the IRS today (they put the wrong post office box number down on the Acknowledgement of Request letter). I was told that our application began it's review 2 days ago and if everything goes Ok (it better, Mike!), then we'll be said and done in 1-2 more weeks. That's less than 2 months. I remember someone telling me when we were first wanting to get started that it takes 2 years and $2000 to get your 501(c)(3)....hmmmmm...So if anyone out there is still wanting to get started with one, let me know. I'll be more than happy to help whoever. Debbie Double D Equine Rescue http://www.geocities.com/Heartland/Flats/2969 Date: Thu, 30 Jul 1998 22:20:27 +0000 From: Fairwind To: equinerescue@MyList.net, Double D Equine Rescue Subject: Re: EQ-ResQ: 501(c)(3)'s Gee Deb that would have been me,, That is because THAT IS how long and about how much it took for OHAHS. Checked my records,,, took 10 months 27 days and $1872.00!!! Of course that was 6 years ago,, So guess the Government has finally sped up? Also I believe in the penny wise dollar foolish adage. OHAHS paid a lawyer to complete all the forms and make sure the incorporation was handled properly, that way it doesn't come back to haunt you ever in the future. I would suggest that all of those who choose to do this themselves make sure they dot all i's and cross all t's. I think it would be a shame to spoil the efforts you are making to save animals in the attempt to cut corners on start up costs. Double D Equine Rescue wrote: I remember someone > telling me when we were first wanting to get started that it takes 2 years > and $2000 to get your 501(c)(3)....hmmmmm...So if anyone out there is still > wanting to get started with one, let me know. I'll be more than happy to > help whoever. > Debbie -- Beverly Whittington President OHAHS URL http://www.geocities.com/Heartland/Valley/2887 From: "Double D Equine Rescue" To: Subject: Re: EQ-ResQ: 501(c)(3)'s Date: Thu, 30 Jul 1998 22:34:28 -0400 >Also I believe in the penny wise dollar foolish adage. OHAHS paid a lawyer to >complete all the forms and make sure the incorporation was handled properly, >that way it doesn't come back to haunt you ever in the future. I would suggest >that all of those who choose to do this themselves make sure they dot all i's >and cross all t's. I think it would be a shame to spoil the efforts you are >making to save animals in the attempt to cut corners on start up costs. > Beverly, We did have a lawyer (and her partner) go over our application before we mailed it out. The lawyers did this free of charge as a donation service to our rescue. (This also included our Articles of Incorporation, Bylaws, all of our contracts, ect.) If you can get the *exact* same services done for *free*, why pay for them? The extra money we saved will be used for vet bills, feed, ect. Debbie From: HVIDEO885@aol.com Date: Thu, 30 Jul 1998 23:02:27 EDT To: equinerescue@MyList.net, ddrescue@nbn.net Subject: Re: EQ-ResQ: 501(c)(3)'s In a message dated 7/30/98 9:43:09 PM US Eastern Standard Time,fairwind writes: > Also I believe in the penny wise dollar foolish adage. OHAHS paid a lawyer > to > >complete all the forms and make sure the incorporation was handled > properly, > >that way it doesn't come back to haunt you ever in the future. I have never heard of it taking so long, or costing so much. Could there have been a problem with your paperwork? There is nothing wrong with having a lawyer go over the paperwork especially if you don't understand the forms. Most of them are understandable and not hard at all. I don't believe that a lawyer would charge that much just to go over them and check them after you have filled them out. After all, you know how your rescue will be run, what the expenses will be, and what is what, therefore, it would make sense that you fill it out yourself (at least in my opinion). > We did have a lawyer (and her partner) go over our application before we > mailed it out. The lawyers did this free of charge as a donation service to > our rescue. (This also included our Articles of Incorporation, Bylaws, all > of our contracts, ect.) If you can get the *exact* same services done for > *free*, why pay for them? The extra money we saved will be used for vet > bills, feed, ect. > Debbie > Many rescues have a lawyer, vet, CPA, and other that are willing to donate time to help by giving advice. Most times people such as these are very busy and can not be there all the time, but are more than glad to help in some way. By doing it yourself, and having someone go over it, like you did, you know things are worded the way you want them and nothing is left out. Congratulations Deb, you are on your way. :) Sharon From: BLRYSTROM@aol.com Date: Fri, 31 Jul 1998 09:31:31 EDT To: equinerescue@MyList.net, ddrescue@nbn.net Subject: Re: EQ-ResQ: 501(c)(3)'s In a message dated 98-07-30 22:45:35 EDT, you write: << f you can get the *exact* same services done for *free*, why pay for them? The extra money we saved will be used for vet bills, feed, ect. >> i know i donated the same stuff to our new county wide animal shelter. most attorneys are required by their state bars to do several hours of pro bono work. i would rather do this than a free divorce . dawn Date: Fri, 31 Jul 1998 12:47:37 -0700 To: equinerescue@MyList.net, BLRYSTROM@aol.com From: Pat Calloway Subject: Re: EQ-ResQ: 501(c)(3)'s At 09:31 AM 7/31/98 EDT, BLRYSTROM@aol.com wrote: >i know i donated the same stuff to our new county wide animal shelter. most >attorneys are required by their state bars to do several hours of pro bono >work. i would rather do this than a free divorce . >dawn Dawn, So, would contacting the state bar be a good way of finding an attorney who might be interested in helping out with all the filings and legal work of setting up a 501 (c) (3) for equine rescue? They'd be listed in the phone book with the rest of the state government stuff, correct? Date: Fri, 31 Jul 1998 20:19:39 -0700 To: equinerescue@MyList.net From: Pat Calloway Subject: Re: EQ-ResQ: 501(c)(3)'s Dawn had meant to share this one with all of us, so I'm forwarding it along and will add it to the 501(c)(3) archives. Thanks, Dawn! (this is regarding having an attorney help with the filings as part of their pro bono work.) From: Errors-To: Date: Fri, 31 Jul 1998 16:02:04 EDT To: epona@concentric.net Subject: Re: EQ-ResQ: 501(c)(3)'s pat, you could contact your state bar or your local county bar also might be a good source. in fact, by contacting your county bar association, they may be able to send you to a certain person with special interests in animal welfare as well as having the knowledge to do the incorporation and related filings. the person they send you to may even be interested in being on the board or serving as your legal counsel on a pro bono basis. for example, i have a friend who is a deputy prosecutor but also serves on the board for a local humane society shelter...plus she does most of their filings, grant writing, as well as being the animals' strongest advocate in the prosecutor's office. dawn From: BLRYSTROM@aol.com Date: Fri, 31 Jul 1998 16:03:37 EDT To: equinerescue@MyList.net, epona@concentric.net Subject: Re: EQ-ResQ: 501(c)(3)'s pat, forgot to say that you will find them under the yellow pages for bar associations. they are not really a "government" organization, but rather a private goup that pays memberships. dawn >Date: Mon, 13 Jul 1998 10:35:19 -0700 >To: epona@concentric.net >From: Mike Dodge >Subject: Re: EQ-ResQ: CLASS: Week of 7/13 - Incorp/Non-Profit > >Pat, I certainly don't mind helping anyone get started. I have all the >forms for Calif. and Federal IRS. > >First they must get incorp. in their home states which we can't help with >other than telling them what they to do. > >We helped Debbie and Larry with Double D and are helping Gail in Fountain >Valley and one up north get started. > >Mike