Setting up 501c3

[SunnyD]

Does anyone have experience with setting up a "Friends of Unit XXX" as a 501c3 to be your chartering organization? How difficult and costly was it, and how do you operate?

[Kahuna]

Yes, we did that and here in Florida. You need a lawyer or you'll never make it. It's not too difficult to operate once set up, but there is an issue of control. In other words, you have to control who the officers and directors are or you'll have internecine problems forever. You also have to register with the State in order to do fundraising. Doesn't cost very much, but requires a lot of monitoring. If you have a lawyer among your parents that would be a big help.

 

Question is, do you need one? We did, because we were a unit that owned a bus, boats and some very expensive equipment which we didn't want to put in the hands of our sponsoring church.

[SunnyD]

Thanks, Kahuna.

 

The issue that we're running into is that our CO says they are not a 501c3 and as a result we've had problems being able to accept donations that have been offered to us. Any other ideas on how to work around this?

[Kahuna]

Hmmmmm, I think you either have to get a new sponsor or create a 501©(3). Maybe others will have a better idea. Do you have a lawyer among your parents? You can do it through LegalZoom, but it's not cheap.

[Twocubdad]

Sunny -- is you CO a church? Many individual churches are not 501c3s by themselves, but are under the umbrella of the larger church association. There's a technical designation for this, maybe some of the accountant-type can provide the proper term.

 

We went through this a few years ago when several parents wanted to match contributions and volunteer hours through corporate foundations. The CO (a Presbyterian church) had us call the local Presbytery which forwarded us a string of documents going back to the Kennedy administration (literally!) under which the Presbyterian Church USA is a non-profit. The Presbytery, our CO and ultimately the troop are covered under the original letter.

 

While this may have been good enough for the foundations we were working with, I don't know that it's kosher for tax issues. This does not constitute tax advice. Please consult your professional tax advisor blah, blah, blah, blah.

 

For those who don't know, you CANNOT use the Council's 501c3 status for your unit. In our case, the council was minorly miffed with the troop because they wanted those parents to designate their corporate match to the council.

[bs1964]

I'd stick with the church as your CO and, if you need one, set up a friends of troop xxx" as a support mechanism. Some companies will only donate to or award grants to 501©(3)'s so there can be a valid need.

 

You'll want to be careful with by-laws and such to make sure officers and board members qualifications and tenures are laid out in advance and make sure someone can take care of tax filings are taken care of.

 

[evry]

If your Troop has a bank account, then the donations could be written to BSA Troop #. The BSA is a 501©(3) and the IRS will not have an issue with minor donations made out to individual troops as being deductible. If the individual donation is in the thousands, then contact your council and go from there.

[Beavah]

Yah, hmmm....

 

evry, I don't think yeh have the right of that, eh? A donation to a unit is not a donation to the BSA or the council, and yeh can't claim it using the BSA's or the local council's 501©(3) status. Just not kosher. Yah, for small donations probably it might be overlooked by da IRS in an individual's audit, but it could get the unit/CO in a world of hot water. Lots of small donations add up to big fraud and tax evasion on the part of the unit/CO. You don't want to go there.

 

My guess is that SunnyD's unit isn't chartered by a church, since da tax status of churches is pretty clear. Probably they're chartered to a 501©(7) not-for-profit club like a BPOE or such. Folks get that confused all of the time, eh? There are a lot of different not-for-profit entities (part 501©) that are income tax exempt, but only a couple (namely (3)) that are charitable and allow the donor to take a deduction as well.

 

So if SunnyD's unit is expecting to be taking in sizable contributions, they'll have to go the incorporation/formal association 501©(3) determination letter route.

 

SunnyD, Kahuna is correct in that all that stuff does need an attorney to guide yeh through it, and that carries some expense. Also has some costs every year in maintaining records, making reports, audits and such. It's a lot of work and cost unless yeh really need it.

 

Keep in mind, too, that if your gross receipts are small, yeh can be a 501©(3) without a determination letter. It's based on a three year rolling average of income. For a cub pack, yeh might be under that. Most boy scout troops aren't.

 

Beavah