[Noisebridge-discuss] membership dues via employer matching funds?

[Sai Emrys]

On Fri, Aug 21, 2009 at 3:23 AM, Peter Hamel<hamelp at yahoo.com> wrote:
> So, I don't know the rules for nonprofits. Does some percentage of money need to come from dues vs. donations or something?

But, clearly you know taxes. Go you for having good ideas how they
could be used to our advantage; hopefully that generates some useful
discussion.


On nonprofit rules: to my knowledge there is no mandate regarding dues
vs donations ratios per se; indeed there's no mandate that nonprofits
need be formally membership organizations at all. (One can have very
membership-like organizations like NB without having members have
corporate status. That's more a political/social decision of whether
one gives members formal vs just informal control.)

However, there are mandates regarding two classes of income:
* "unrelated income", such as if Noisebridge were to start selling
Club Mate - this IS taxable (990-T, if >$1k/yr)
* "large one-time donations", such as if someone cool gave Noisebridge $100k

The unrelated income one has the potential to threaten NB's non-profit
status if it gets to be too high relative to "related income" (aka
"exempt function income"), which includes donations, membership fees,
and profit from directly related commerce - such as if Noisebrdige
were to start selling Makerbots, charge class fees, sell hacking
propaganda (eg shirts), etc. (Mind I'm not advocating here for what NB
ought to do or not do, just discussing nonprofit finance rules.)

One-time donations are a bit of a pain in that they affect how one
calculates status and yearly taxes. In reasonable amounts - if they
are, in fact, rare deals - they're not usually a problem though.

Nonprofits are classified as tax-exempt by the IRS based on this rule:
"1. It normally receives a substantial part of its support from a
governmental unit or from contributions from the general public; or,
2. It normally receives more than one-third of its support from gifts,
grants, contributions, or gross receipts from activities related to
its exempt purposes, and not more than one-third of its support from
gross investment income."

The exact rules for calculating those two rules are niggly (see links
below for the overview version), but basically you have to be in one
or the other. Usually on your tax exemption you just ask the IRS to
classify you into one rule or the other; I don't know what NB's status
is.

If you don't have a copy of the Nolo book _How to form a non-profit
corporation in California_ (which IIRC Andy has a copy of; mine
belongs to my nonprofit so I can't loan it), borrow one. It discusses
this in detail.

In the meantime read these if you care:
http://www.irs.gov/charities/charitable/article/0,,id=123303,00.html
http://www.irs.gov/publications/p598/index.html
http://www.stayexempt.org/mini-courses/foundclassif/player.html (also
covers the one-time donations rules)

There's something less long-winded than the stayexempt thing re.
classification rules, but I didn't find it offhand.

There are some related rules like avoiding self-dealing (i.e. making
money for our friends or selves) or being a covert for-profit (turning
exempt money to non-exempt money), but those are reasonably common
sense.

In any event, I don't think NB will have an issue ever falling out of
one of the two classifications unless we start doing things we
oughtn't anyway.

- Sai