Tax ID Number

[Lady_Leigh67]

When can a Unit use the Charter Organizations tax id number? Our CO is the PTA of the school where we meet. We have used it in the past only to open our Unit's Checking Account at a nearby bank.

 

I went back and looked through my notes from Committee Chair training (CSLST). Our leader mentioned that it was discouraged to use the CO's tax id because of paperwork hassles for the CO.

 

To make a long-story short (hopefully) we are having our Annual End of Year Picnic this month. One of our Den Leaders and a Committee Member are planning the event. We just found out that they went directly to the PTA President and got the tax id number. PTA pres assumed that they had cleared this with Committee (which they did not). Also, we found out that DL has been holding money she earned from selling Council Scout Show cards back in April.

 

 

[Pack212Scouter]

Well, you've got a number of issues here. First of all, getting a tax ID number from a CO, even a church, is becoming more and more difficult. This is because of numerous reasons, including ID theft, lack of controls over what the unit may spend on, possible tax liability of the CO. All that you can do is continue to ask and try to explain the need for it.

 

You can apply for your own EIN, but this can get messy. If you have more than $5000 go through your unit in a year, it does not automatically meet non-profit status. You then would either fall under you CO's non-profit status (a whole new can of worms), would have to file tax forms and pay taxes, or have to self-incorporate. All of the above is a major headache, the last being frowned upon because of the complexity of it, and the fact that you are then your own CO, which BSA generally frowns upon. Some units form a "Friends of Unit XXX" non-profit organization that handles all the unit's finances. Once again, this can get complicated.

 

As for this DL, the CC and COR needs to have a sit down with them and a) find out why they are holding money that belongs to the CO, b) have that money turned over, and c) explain that any communication with the CO needs to go through the CC and COR.

[Lady_Leigh67]

Pack212Scouter, thanks for the reply.

 

[Gags]

I'm going to take a slightly opposite approach.

 

Maybe you should be looking for more DL's like her? DL's who show initiative and don't need their hand held every step of the way. She was in charge of planning the event, right?

 

You also make it sound as if she was siphoning off funds - but we don't have the whole story here (seems to be a common theme of late!). The event was in April - it's the beginning of June. That's what - 40 days? 6 weeks? I've gone months carrying around money in my uniform pocket that were reimbursements from food costs for a camping trip - how much money are we talking about here?

 

But to suddenly spring the CC and COR on her to return the money, instead of having the Treasurer make a friendly request? Well, congratulations on having an active COR, but good luck finding a replacement DL.

 

And I understand the liability issues of handing out the Tax ID # to everyone - but if you're purchasing supplies for a 100+ person picnic (attendance assumption on my part), some businesses require the # so they won't have to charge you sales tax. (Scout is thrifty?) IIRC, the non-profit isn't required to file any "we avoided the following sales tax" forms come April. But I'm not a tax expert, so I'm willing to stand corrected.

 

Anyway, as someone who's an expert at "I'll get around to cashing that check tomorrow", just thought I'd present a different perspective.

 

Cheers,

 

Gags

[Beavah]

When can a Unit use the Charter Organizations tax id number?

 

Whenever the CO says it should. As the unit is really just a program of the CO's, the proper answer is "whenever it needs to" and there isn't a very good internal reason not to.

 

We have used it in the past only to open our Unit's Checking Account at a nearby bank... Our leader mentioned that it was discouraged to use the CO's tax id because of paperwork hassles for the CO.

 

Yah, not sure what paperwork hassles are a concern? Can't think of too many.

 

Generally speakin', a lot of states have sales taxes which allow a NFP exemption from the tax. To my mind, not using an exemption specifically allowed by law is not being thrifty. In fact, it's being foolish, and workin' against a clear public policy of your state.

 

So most CO's I know routinely issue sales tax exemption forms (includin' their EIN or state equivalent) for that purpose. And it would be perfectly fine and responsible for a scout volunteer to ask!

 

Also, we found out that DL has been holding money she earned from selling Council Scout Show cards back in April.

 

This is a different issue, but unless there are some clear (and clearly communicated) procedures bein' violated and we're talkin' a 4-figure amount, I'm inclined to agree with Gags, eh?

 

Yeh give a gentle reminder of procedure and collect the money (or she uses it for da picnic seed money or whatever). Not time for a federal case, since you're clearly talkin' about an active and helpful volunteer.

 

Beavah

 

[Lady_Leigh67]

Gags and Beavah, thanks guys!

[Pack212Scouter]

Gags & Beavah,

 

In a perfect Scouting world, where everything makes sense, then yeah those answers are the right ones. Unfortunately not all, and in fact not all that many Units get to operate in that perfect world with their CO.

 

Let's look at this situation. We have an enthusiastic DL that wants to do things. That's awesome in my opinion, and I am sure that my response sounded a little harsher than I meant. This, as in all things requires a measured and escalating response. The CC and possibly COR are the correct people to handle it though.

 

Now in addition to that, things go through the CC and COR to the CO for a reason. In this situation we may or may not now have a PTA committee that is unhappy with the unit for what they see as an "end run" for the EIN. This in a situation (schools) which are already becoming a tenuous relationship for BSA. Is the perception mistaken? I am sure, however that does not help the situation that has developed.

[AvidSM]

A unit should be using their CO's Tax ID number when the unit needs to make a valid unit purchase of a taxible item. A CO should understand that a unit needs to use their number and should not have a problem with it or need to be informed of every purchase. Non-profits should not have to pay taxes and the charter agreement makes a unit part of that non-profit organization.

 

Also, Council does not want units using their Tax ID number. So a unit really does not have any other option for tax-free purchasing or for opening a unit checking account.

 

I have a unit in my district that has been told by their CO that they can't use their Tax ID number to open a unit checking account with a bank. They were using a checking account which was with the CO. They are at the point where they have to find a new CO.

 

 

[Pack212Scouter]

Yes, a unit should be using their CO's EIN as well as their CO's non-profit status. I think that you will find this is a problem more common than you think. I certainly have discovered this.

[ScoutNut]

There appears to be 2 different tax numbers referenced here.

 

A FEDERAL tax identification number (EIN) is used by banks and the IRS to determine Federal income and employer taxes. You need to have one if you have an interest bearing bank account. It is fairly easy for a unit to obtain their own EIN. It can even be done online at the IRS.

 

Having an EIN does not mean you are automatically a 501©(3) entity.

 

 

A STATE Sales Tax Exemption number is a entirely different thing. It allows you to avoid paying state sales tax when purchasing items to be used for your unit.

 

Every state has different rules for who are issued these numbers, and how they can be used. Here, the state of Illinois, extends exemption from it's sales tax to all BSA Councils in the state, and all of their chartered units. There is one Exemption number that is used by all Scouters statewide. It is up to Colorado as to how they administer this.

 

 

I see no reason to need your PTA's EIN for a Pack Picnic unless you are soliciting donations of $75 and over. Even then, per the IRS, donors of $75 and over must be given a written acknowledgment from the charitable organization, which in your case is the PTA - NOT the Pack.

 

What you would more likely need is the State Sales Tax Exemption. I would suggest contacting your council to see how that is handled in Colorado.

 

 

The DL holding onto money from a Council sponsored fundraiser confuses me. Who was in charge of the fundraiser in your Pack? Did they keep track of who was selling, and who paid what? Did the Council get it's portion of the profit? Did the boys get all of their incentives? Why did the Pack Treasurer not know that all of the Pack's profit had not been turned in? It sounds like your Pack's procedures for money earning projects need to be looked at.

 

 

[Beavah]

It is fairly easy for a unit to obtain their own EIN. It can even be done online at the IRS.

 

Fairly easy, but not always prudent, eh? By applying for an EIN you are in essence telling da bank and da IRS that you are operating as an unincorporated association. That's a very different thing than being a youth program of an incorporated 501©(3) NFP (insulated by the corporation, protected by that corporation's insurance, with a charitable determination on the books). Most PTAs these days are incorporated, with their own insurance through the national PTA. Yeh want that insulation and protection if it's available to you. And if your receipts are more than $5K per year (quite possible in a larger pack), yeh want that tax-exempt determination.

 

I see no reason to need your PTA's EIN for a Pack Picnic unless you are soliciting donations of $75 and over. Even then, per the IRS, donors of $75 and over must be given a written acknowledgment from the charitable organization, which in your case is the PTA - NOT the Pack.

 

I think yeh mean $250, not $75. And the pack (treasurer or CC or Cubmaster) as part of da PTA can certainly be designated as agent for issuing acknowledgment letters. In fact, that's a nice way to go, since the donors probably know the Cubmaster rather than the PTA president.

 

Unless the pack has a six-figure endowment fund or pays its Cubmaster, this really isn't a big deal. Biggest issue is just what Pack212Scouter mentions, eh? Yeh want to make sure the PTA officers understand the relationship so they don't get a perception that you're tryin' to do something bad at their expense.

 

Beavah

(This message has been edited by Beavah)

[eisely]

It is worth repeating a message about something that has come up in the past regarding tax ID numbers.

 

DO NOT USE ANYBODY'S PERSONAL SOCIAL SECURITY NUMBER ON YOUR UNIT BANK ACCOUNT.