5013c Help

[Joe G.]

Originally Posted by stinglikeabee

Thanks for the information on the EZ form. I think this would suit a small number of FRC teams, however. Many routinely pull in $50,000 or more a season. I feel it would be in the best interest of any team or group of teams looking to form a 501(c)(3) to file the full 1023 form.

Sorry, mistyped my post. The 50,000 is per year, not a total of three years. Still not applicable for some teams, but for most smaller programs, it should work fine.

[protoserge]

Originally Posted by Joe G.

Sorry, mistyped my post. The 50,000 is per year, not a total of three years. Still not applicable for some teams, but for most smaller programs, it should work fine.

Thanks for the clarification. That's quite a bit of difference

[sanddrag]

Is it possible to start with the EZ form and then convert to the other if and when you exceed $50,000 in annual gross income?

[Joe G.]

Originally Posted by sanddrag

Is it possible to start with the EZ form and then convert to the other if and when you exceed $50,000 in annual gross income?

By my understanding, yes, as long as it's three fiscal years out from filing. The annual filing of form 990, 990-ez, or 990-n will confirm that your 501c3's activities are compliant. The philosophy with the 1023 is to analyze all edge cases in depth and approve activities before the organization begins their operations as a nonprofit, where the philosophy with the 1023ez is to get organizations not likely to be a problem a fast start, approving first and analyzing activities in depth as it becomes necessary.

Definitely consult a professional on this though.

[sanddrag]

Originally Posted by Joe G.

By my understanding, yes, as long as it's three fiscal years out from filing. The annual filing of form 990, 990-ez, or 990-n will confirm that your 501c3's activities are compliant. The philosophy with the 1023 is to analyze all edge cases in depth and approve activities before the organization begins their operations as a nonprofit, where the philosophy with the 1023ez is to get organizations not likely to be a problem a fast start, approving first and analyzing activities in depth as it becomes necessary.

Definitely consult a professional on this though.

Oooh, three years out huh? I could see us with 12-24 months under the $50,000 cap, and (hopefully) surpassing that about two years after establishing the organization. Hrrmmm.

Thanks for the help though. This has been VERY informational.

[protoserge]

Originally Posted by sanddrag

Oooh, three years out huh? I could see us with 12-24 months under the $50,000 cap, and (hopefully) surpassing that about two years after establishing the organization. Hrrmmm.

Thanks for the help though. This has been VERY informational.

I would definitely recommend you do the normal 1023 form. It really is not bad. It just takes a few of the organizers/founders to sit down and hammer through it for a day to make sure you've answered every question on the document. If you think you may engage in any of the activities listed (scholarships, etc.) identify it and establish a policy or policy document that will detail the operations process.

Assuming you've already established a nonprofit business entity in your state, you can collect funds and operate, however, donations are not tax-deductible at this point.

Once you build momentum, you don't want an IRS process to halt you from being more aggressive in raising funds and establishing partnerships with donors.

Set yourself up for the long term. We (FIRST family) want you around for a while

[Joe G.]

Originally Posted by stinglikeabee

I would definitely recommend you do the normal 1023 form. It really is not bad. It just takes a few of the organizers/founders to sit down and hammer through it for a day to make sure you've answered every question on the document. If you think you may engage in any of the activities listed (scholarships, etc.) identify it and establish a policy or policy document that will detail the operations process.

Assuming you've already established a nonprofit business entity in your state, you can collect funds and operate, however, donations are not tax-deductible at this point.

Once you build momentum, you don't want an IRS process to halt you from being more aggressive in raising funds and establishing partnerships with donors.

Set yourself up for the long term. We (FIRST family) want you around for a while

Although the impact right now is probably pretty minimal, since the 1023ez has only been available for a few months, I believe the intent is that the existence of the 1023ez will also drive down the processing time on the full 1023. Since less 1023's will be being submitted, the IRS will be able to go through them quicker.

[Monochron]

If you are part of a pre-existing 501(c)3 then it's officers and organizers are officially responsible for your finances. There is no real way to change that legally.

If they do not wish to allow you to operate in a way that is conducive to robotics education / design and construction then I would recommend you have a very nice and polite conversation with them to let them know you will be getting 501(c)3 status through other means. Like others have said, there are plenty of resources here on getting 501(c)3 status on your own (though it is typically arduous). You could also attempt to partner with a 4H organization or other that will get you 501(c)3, but the school might not be so keen on that.

[protoserge]

Originally Posted by Joe G.

Although the impact right now is probably pretty minimal, since the 1023ez has only been available for a few months, I believe the intent is that the existence of the 1023ez will also drive down the processing time on the full 1023. Since less 1023's will be being submitted, the IRS will be able to go through them quicker.

That's a very good assessment. If it does indeed work (yes, some things in the government do work!) it will be very welcomed. I'm sure many school athletic booster programs would opt for the 1023EZ, as well as a number of other smaller school and other civic organizations that really just want nonprofit status to accept a few donations a year to cover their lower expenses.

[Joe G.]

Originally Posted by stinglikeabee

That's a very good assessment. If it does indeed work (yes, some things in the government do work!) it will be very welcomed. I'm sure many school athletic booster programs would opt for the 1023EZ, as well as a number of other smaller school and other civic organizations that really just want nonprofit status to accept a few donations a year to cover their lower expenses.

I saw a statistic somewhere (can't find the source right now), estimating that as many as 75% of the 60,000 currently pending 1023 forms would have been eligible for the 1023ez.

[runneals]

Originally Posted by Joe G.

I highly suggest trying to find a nonprofit partner to work with for financial management. My rookie team is set up with 4-H, and we've been very happy with the system they have. It's very much "make purchases now, and give us an audit to verify compliance later," rather than the other way around.

Being a life-long 4-H'er & now alum, I'm kinda biased on this issue. I heavily suggest becoming a 4-H club, because you would become your own entity/club and would automatically (just have to fill out like 1 form) gain 501(c)3 status under the 4-H Organization umbrella. This would probably separate yourself from your school (which may or may not be a good thing - It would potentially help to gain the support of sponsors who are already contributing to your school, but may lose your school space/support). Another financial/legal advantage is that by being involved with 4-H is that your members would receive liability insurance, all volunteers get background checked, and would have the support of your land-grant university.
Plus the member aspect is really nice, since you can draw members from multiple schools/towns, which can lead to many more opportunities for sponsorships as compared with a school based club drawing a specific town.

[Carol]

If you do have to form your own corporation, I strongly suggest that you get the advise of a professional to set up a system to track and report your finances, and what can and cannot be deducted by individuals (like money spent for food at meetings). It will save a lot of grief later on.

[tylerc102]

It sounds like the biggest problem is cash flow. That you don't have a mentor with (or at least willing to use for any number of reasons) a credit card for the larger purchases. For us, this was more key than whether we were using ASB or a 501(c)3.

We've been dealing with an ASB at our school for four years, and we've been able to get by just fine. Yes there is a process, but most of the time that is fine.

We have an Open PO that covers a large category (tools & parts, marketing supplies & food) that provides for a quick reimbursement (well within the span of a credit card billing period). Because the PO has already been approved, we don't need to worry about potentially getting denied on the purchase.

For larger purchases that we don't want to cover, we just play the system and get a check in advanced (because for large purchases, you should have been planning it out and giving yourself plenty of time .. right?). Then you have a nice check that can either be made out to a mentor who will then in turn pay the vendor, or written directly to the vendor.

If you still are interested in trying to make ASB work, let me know and we can give you all the tips we've learned using it. The simplicity of having someone else do it has really paid dividends for our team because of our limited number of mentors.