more banking questions

[Beavah]

Isn't this the same as forming a "Friends of" organization?

 

I would think there's a problem forming your unit in to a non-profit being already an entity of your CO. I would think there's issues there. It would be like the youth ministry forming their own non-profit but being under the charter of the church.

 

There are enough lawyers here (@@CalicoPenn?) to weigh in on this subject.

 

Nah, no particular issues, @@Krampus.   The most common thing is to have a separate charitable corporation that holds the assets of the group, eh?   Sea Scout Ships did a lot of this, with separate corporations that held the boats.  That way neither the chartered organization nor the BSA could get ideas about makin' a bunch of quick dollars by shuttin' down the unit and sellin' off the assets.    NFPs can also have subsidiary separately incorporated NFPs, too. 

 

That the same thing as a "Friends of" organization, eh?  "Friends of" organizations are actually the chartered partner, and they're very rarely incorporated or have a separate tax status.  I think "Friends of" organizations are not a great idea.  I've found 'em to be pretty unstable.   Dependin' on da state, they can leave the parents fairly exposed to financial and other liabilities. 

 

Beavah

[Krampus]

That the same thing as a "Friends of" organization, eh?  "Friends of" organizations are actually the chartered partner, and they're very rarely incorporated or have a separate tax status.  I think "Friends of" organizations are not a great idea.  I've found 'em to be pretty unstable.   Dependin' on da state, they can leave the parents fairly exposed to financial and other liabilities. 

 

Beavah

 

 

Right, the Friends Of is the charter holder. But in this case you have a unit that already has a CO and now wants to establish themselves as a non-profit chartered by a non-profit.

 

Sounds like some issues there. Are you a lawyer too?

[seldon]

Sorry to have hijacked the thread. Thanks Krampus and Beavah for the questions. I do know of at least one unit that has a non-profit Friends of X partner but is chartered by a church.

 

I don't really see the difference between a unit that has incorporated in order to meet the post-9/11 money-laundering rules and a unit that has all its finances under someone's SSN. In both cases the entity running the program is separate from the one responsible for filing the taxes.

[Krampus]

Sorry to have hijacked the thread. Thanks Krampus and Beavah for the questions. I do know of at least one unit that has a non-profit Friends of X partner but is chartered by a church.

 

I don't really see the difference between a unit that has incorporated in order to meet the post-9/11 money-laundering rules and a unit that has all its finances under someone's SSN. In both cases the entity running the program is separate from the one responsible for filing the taxes.

 

I am sure an attorney would know the issues. It just sounds funny having a non-profit entity that is part of another non-profit charter organization. 

 

Oddly enough, when you need an attorney here to offer an opinion they are no where to be found. When you want them to stop offering opinions, they are everywhere. ;:

[Stosh]

I stayed in a Holiday Inn Express last night, what do you want to know?

[T2Eagle]

I am sure an attorney would know the issues. It just sounds funny having a non-profit entity that is part of another non-profit charter organization. 

 

If I understand what you're asking, it's about situations like Beav described where you have a CO and a separate "Friends of"... corporation that owns assets like a boat or a bus.

 

How that would work is that they are actually separate legal entities, neither is a subsidiary of the other, and they exist for different reasons, it just happens that both provide a benefit to a scout unit.  The CO is the same as it ever is. Let's use as an example a church that charters a troop; it controls the troop, owns the troop stuff, etc.  The "Friends of" corporation is its own entity, it doesn't have a charter with BSA, it owns its own assets --- importantly these assets are not subject to either the BSA or CO control.  The "Friends of" entity then magnanimously lets the troop use its assets.  The "Friends of" corp probably has a board of directors that looks remarkably similar to the troop committee.

 

It's worth noting that this is an entirely different situation than a "Friends of" set up specifically to charter a unit.  It's also worth noting that none of this has anything to do with getting an EIN or setting up a bank account.

[T2Eagle]

I find myself in a similar position. Despite all the warnings from the BSA against units seeking non-profit status, it seems like they've left us no other choice.

 

A tip, federal 501c4 status currently carries no paperwork requirement or fee to establish for income up to $50,000. The annual tax return is a postcard.

 

The difference between a 501c3 charity or church and 501c4 is that individuals cannot deduct donations to the latter.

 

Getting things organized on the state level is a lot more complicated in California. Donno about Florida.

If your situation is the same as blw I think it's important to remember what it is you're trying to achieve.  All you want is a bank account.  It's been a while since I had to do this so I'm not completely familiar with all the ins and outs today.  But likely a bank needs to have an EIN, (an employer identification number) or some other tax ID number, for every account it has.  You don't need to be a legal corporation to get an EIN, you do need to disclose "the name and Taxpayer Identification Number (SSN, ITIN, or EIN) of the true principal officer, general partner, grantor, owner or trustor. This individual or entity, which the IRS will call the “responsible party,†controls, manages, or directs the applicant entity and the disposition of its funds and assets."

 

​The Byzantium that Beav describes is that someone from the troop applies for an EIN listing the parish or higher EIN as the responsible party.  This works because then any reports that might be generated, like a 1099 INT for interest earned, will be reported on the troop EIN and not the parish's so there are no surprises for the parish.  None of this changes the legal relationship between the unit and the CO, nor does it have anything to do with determining the non profit or tax status of either the unit or CO.  It really is only about an ID number.

 

The most important thing to remember is not to trust free advice from anyone on the internet about anything.

[Stosh]

If your situation is the same as blw I think it's important to remember what it is you're trying to achieve.  All you want is a bank account.  It's been a while since I had to do this so I'm not completely familiar with all the ins and outs today.  But likely a bank needs to have an EIN, (an employer identification number) or some other tax ID number, for every account it has.  You don't need to be a legal corporation to get an EIN, you do need to disclose "the name and Taxpayer Identification Number (SSN, ITIN, or EIN) of the true principal officer, general partner, grantor, owner or trustor. This individual or entity, which the IRS will call the “responsible party,†controls, manages, or directs the applicant entity and the disposition of its funds and assets."

 

​The Byzantium that Beav describes is that someone from the troop applies for an EIN listing the parish or higher EIN as the responsible party.  This works because then any reports that might be generated, like a 1099 INT for interest earned, will be reported on the troop EIN and not the parish's so there are no surprises for the parish.  None of this changes the legal relationship between the unit and the CO, nor does it have anything to do with determining the non profit or tax status of either the unit or CO.  It really is only about an ID number.

 

The most important thing to remember is not to trust free advice from anyone on the internet about anything.

 

Does that apply to your last statement? 

[T2Eagle]

Does that apply to your last statement? 

Absolutely, trust only what you can verify.

[Stosh]

[Krampus]

If I understand what you're asking, it's about situations like Beav described where you have a CO and a separate "Friends of"... corporation that owns assets like a boat or a bus.

 

How that would work is that they are actually separate legal entities, neither is a subsidiary of the other, and they exist for different reasons, it just happens that both provide a benefit to a scout unit.  The CO is the same as it ever is. Let's use as an example a church that charters a troop; it controls the troop, owns the troop stuff, etc.  The "Friends of" corporation is its own entity, it doesn't have a charter with BSA, it owns its own assets --- importantly these assets are not subject to either the BSA or CO control.  The "Friends of" entity then magnanimously lets the troop use its assets.  The "Friends of" corp probably has a board of directors that looks remarkably similar to the troop committee.

 

It's worth noting that this is an entirely different situation than a "Friends of" set up specifically to charter a unit.  It's also worth noting that none of this has anything to do with getting an EIN or setting up a bank account.

So the Friends Of org is not associated with the church or Scouting? It's it's own entity with bylaws and charter? So they control the funds and gear of a troop and loan it to them to use? The troop, chartered by the church, essentially has no assets? They borrow from the Friends Of org?

[blw2]

I find myself in a similar position. Despite all the warnings from the BSA against units seeking non-profit status, it seems like they've left us no other choice.

 

A tip, federal 501c4 status currently carries no paperwork requirement or fee to establish for income up to $50,000. The annual tax return is a postcard.

 

The difference between a 501c3 charity or church and 501c4 is that individuals cannot deduct donations to the latter.

 

Getting things organized on the state level is a lot more complicated in California. Donno about Florida.

 

yes, same here. I think.

 

It does seem like the state "name" thing might be the sticky wicket.  It seems the IRS SS-4 form isn't going to be a big deal.  The thing I have yet to determine is establishing the name of the organization.  According to what I'm being told by the bank, the name of teh organization as listed on the EIN has to match the state business database, sunbiz, which seems to be where corporate names are listed/registered.

 

I'm not familiar with how other units do "Friends of X" organizations, and I haven't found much information on how that works with the CO. Probably most are established specifically to enable tax-deductible contributions, whereas we're talking about just opening a bank account.

 

I've asked about this before and I got helpful but not definitive answers. In our case the CO flat out doesn't want us using their EIN.

 

When you apply for an EIN, you are assigning tax responsibility for the funds in your account. If blw2 can create a subsidiary EIN using the church, that'd be the way to go.

 

and I'm not sure about this yet either.  It really boils down to this for us too.  The church is ok with our using tehir number, but the diocese is not, and nobody wants anything more to do with it.

[blw2]

Yah, hmmmm...

 

Da bankin' regulations keep gettin' more complimicated because of the efforts to curtail money laundering, eh?  And Dodd-Frank, and other things.   Makes doin' normal stuff hard.

 

@@blw2, Catholic Church organizations that are not religious orders have a funny legal structure, eh?   They are usually set up as somethin' called a "Corporation Sole" directed by the bishop.   Da actual structure of that sometimes varies by state.  What that means is that from a legal perspective the only entity is the diocese, eh?  Parish's don't exist legally, they're just administrative subdivisions of the diocese corporation.   Of course the diocese doesn't want to be givin' out its EIN willy-nilly (though yeh can look it up ).   So what happens is that there are accounts on accounts, eh?  Sometimes with parishes, sometimes with ladies' groups and mens' groups and other things.   I had a colleague who was once involved in tryin' to audit a Catholic diocese.  He said "byzantine" didn't even begin to describe it.

 

No reason for yeh to get all caught up in that, eh?  Yeh just do what everybody else did to create "byzantine" and yeh create your own account.

 

Some options for yeh.

 

1. Take the parish up on da offer and let 'em handle the bookkeeping and put stuff in their accounts.  Advantage is yeh can earn interest in the accounts without creatin' headaches.   Yeh also get oversight and internal auditing for free, eh?   It can be a good way to go, and I know several troops that do this.
2. Use the parish EIN to set up the scout account if it has one.   Not every parish does, it depends a lot on how da diocese corporation chooses to byzantine things.      I know several troops who do this, eh?  It's a good way to go because if someone goes off da rails or things run downhill and then the treasurer kicks the bucket, yeh still have an identified (pseudo-)entity that can re-establish people on the account. 
3. File for your own EIN for the troop in the way you suggest.  In this case, I recommend yeh don't get an interest-bearing account, since that could then make da tax situation a bit more complicated in terms of hoops yeh have to jump through.   As a first choice, I'd use da parish address and the parish business manager as contacts, eh?   Better than puttin' anybody else down because it creates headaches changin' address with turnover.  I don't know anybody doin' this.
4. The bank should have an account class for small community organizations, eh?  Things like unincorporated community associations and the like.  In this case, yeh have to use personal SSNs.   That's fine, eh?  Just get a non-interest-bearing account to avoid the tax headache.  Put at least 4 people on the account to allow for turnover, and if possible get someone from da parish as a signatory as well.   If yeh can't use parish staff, yeh might be able to get someone from their mens' group if they do work with kids.  I know lots of troops who go this route.

Yeh don't want to try to separately incorporate your unit, eh?  That gets way too complicated and generally becomes too much work for a typical unit.  Sometimes if you're somethin' like a Sea Scout Ship where yeh have major assets (like big boats) or folks are makin' major gifts it might make sense to do that, but not for a regular troop.

 

Of course this is just da off-da-cuff advice of someone on the internet who looks like a furry long-toothed critter with big teeth.   If yeh want genuine legal, tax, or bankin' advice, I reckon there's reasons why yeh have professionals in your area, eh?

 

Beavah

yeah, #1 wasn't really an offer.  It was the initial knee-jerk reaction form the secretary.  When it boils down, they really don't want. 

#2 is exactly why we thought this approach was the most logical.  It does look like the parish has its own EIN which is different from the diocese... It would have been ideal, as you say, but sadly it isn't proving workable.  With new banking rules, appearently they need to put the pastor and other priest on teh account as signers, so their personal info is needed.  A wall I'm up against.

 

I talked with the bank folks a bit more yesterday PM.  It seems that 3 is about the only option at this point..... except I'm figuring that I'll have to list a troop committee member as administrator, prob me as treasurer, but I will plan on listing the parish address.

 

I think your point #4 and the issue of NOT incorporating might be the sticking point.  According to the bank, it would be a "commercial account" = not personal.... but coming up with a registered name with incorporating is what I still need to determine how to do.

 

 

I asked the folks at the bank, how other troops are set up.  They speculate that it's mostly an issue becasue of recent bankjing rules changes and that most of the existing troop accounts came before this stuff....  I asked if they have accounts for any of the other troops/clubs that fall under teh catholic church.... probably hundreds or thousands in this diocese alone!  They speculated that its a grandfathered-in thing...

 

 

It seems like I've uncovered a relatively new but major issue that the BSA charter structure will face with new units.

[blw2]

well I'm certainly no lawyer, CPA, or financial guru

I'm an engineer, so only looking at what makes sense logically, and trying to wade through this....

Even though it's all non-official internet advice, i really appreciate the help in thinking it all through!

 

​The Byzantium that Beav describes is that someone from the troop applies for an EIN listing the parish or higher EIN as the responsible party.  This works because then any reports that might be generated, like a 1099 INT for interest earned, will be reported on the troop EIN and not the parish's so there are no surprises for the parish.  None of this changes the legal relationship between the unit and the CO, nor does it have anything to do with determining the non profit or tax status of either the unit or CO.  It really is only about an ID number.

 

The most important thing to remember is not to trust free advice from anyone on the internet about anything.

this is what I was thinking it was..... that I would only only be getting a number, and EIN.....not getting a non-profit status or a corporation of any kind.  That's teh way it seems to read.  Am I wrong?

 

It seems a relatively easy process to change the address or administrator's name on this EIN down the road once I move along....

right?

[Stosh]

Why doesn't the Troop simply ask for a W-9 from the CO?