[Noisebridge-discuss] Question about 501(c)(3) status ....

[Joseph Brenner]

<pabutusa at gmail.com> wrote:
>  I'm part of a "newly rejuvenated" Amateur Radio group in New Jersey the
> "Penn-Jersey Amateur Radio Club"

> At a recent meeting someone brought up the topic of going for 501(c)(3)
> status ..... while it sounds interesting I'm not sure if it's worth the
> effort???

Just to take the other side of the argument, getting 501(c)(3) status has
some hassles associated with it, like suddenly you need a "board of
directors" and so on; there are some political restrictions on what you're
allowed to do afterwards (you can't endorse a political candidate, for
example); and you might find that you've got higher visibility and scrutiny
from agencies  like the IRS -- it would be a serious no-no, for example, to
try to run a for-profit business with 501(c)(3) tax exempt status, so you'd
better make sure that nothing you do looks too much like a business  (e.g.
"Fred put in a lot of effort on this fund-raising campaign, he deserves to
take a cut off the top").

I know of one organization that arguably screwed up once it became a legit
non-profit-- they were getting lots grants for this and that, they had lots
of hired employees, but they suddenly hit a wall and nearly lost it.
There's an endemic problem with relying on grant money: it rarely covers
operating expenses, so if you don't have a strong source of some other kind
of income there's a temptation to start juggling money from one account to
another in hopes of paying it back when times are better.  I bet the "board
of directors" there regrets not demanding a stronger financial accounting--
if I understand correctly, hypothetically they could be liable for some of
the debts of the organization.

So, if you don't really need the 501(c)(3) status (e.g. for encouraging
donations) it might be better to hang loose.   For example, the Burning Man
org originally decided that they really didn't want to be a non-profit, and
for quite a few years they managed to do a lot of good work as an LLC.
It's only recently that they started going the non-profit route when they
started wondering things like "what happens to this thing after we're dead?
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