[SMCARA] Something to consider

Wed Nov 5 23:16:58 EST 2014

Fellow SMCARA members,

  With regard to the topic of incorporating the SMCARA into a non-profit
corporation, yes... we did investigate this some years ago and decided NOT
to pursue it.  While there might be some small advantages to being
considered a "non-profit" corporation, the disadvantages far outweigh the
advantages, especially for a very small group like ours.  At present, while
we might 'think' we are a non-profit organization, in the eyes of the
government we are not since we don't hold an IRS 501(c)(3) tax exemption
endorsement.  So what are the advantages and disadvantages of filing for
501(c)(3) status:

501(c)(3) advantages:

Tax exemption/deduction: Organizations that qualify as public charities
under Internal Revenue Code 501(c)(3) are eligible for federal exemption
from payment of corporate income tax. Once exempt from this tax, the
nonprofit will usually be exempt from similar state and local taxes. If an
organization has obtained 501(c)(3) tax exempt status, an individual's or
company's charitable contributions to this entity are tax-deductible.

Eligibility for public and private grants: Nonprofit organizations are
allowed to solicit charitable donations from the public. Many foundations
and government agencies limit their grants to public charities.

Formal structure: A nonprofit organization exists as a legal entity in its
own right and separately from its founder(s). Incorporation puts the
nonprofit's mission and structure above the personal interests of
individuals associated with it.

Limited liability: Under the law, creditors and courts are limited to the
assets of the nonprofit organization. The founders, directors, members, and
employees are not personally liable for the nonprofit's debts. There are
exceptions. A person cannot use the corporation to shield illegal or
irresponsible acts on his/her part. Also, directors have a fiduciary
responsibility; if they do not perform their jobs in the nonprofit's best
interests, and the nonprofit is harmed, they can be held liable.

501(c)(3) disadvantages:

Cost: Creating a nonprofit organization takes time, effort, and money.
Because a nonprofit organization is a legal entity under federal, state, and
local laws, the use of an attorney, accountant, or other professional may
well prove necessary. Aside from legal or other consultant fees, applying
for Federal tax exemption can cost $200-$850 or more, in addition to state
fees for incorporation.

Paperwork: As an exempt corporation, a nonprofit must keep detailed records
and submit annual filings to the state and IRS by stated deadlines in order
to keep its active and exempt status.

Shared control: Although the people who create nonprofits like to shape and
control their creations, personal control is limited. A nonprofit
organization is subject to laws and regulations, including its own articles
of incorporation and bylaws. In some states, a nonprofit is required to have
several directors, who in turn are the only people allowed to elect or
appoint the officers who determine policy.

Scrutiny by the public: A nonprofit is dedicated to the public interest;
therefore, its finances are open to public inspection. The public may obtain
copies of a nonprofit organization's state and Federal filings to learn
about salaries and other expenditures.

As you can see, it takes months of legal work and quite a bit of money to
draft up the organization's articles of incorporation; ensure that the
bylaws are correctly written; you must create a board of directors who enact
the Corporation's policies... and you have to do all that before you file
with the IRS for a (you hope) favorable decision.  All of your financial
matters have to be kept up to date and reviewed by an accountant once a year
and you must file reports with the State of Maryland and the IRS annually.
Make a mistake... the results can be devastating including fines, lawsuits
and loss of your 501(c)(3) status.  In my opinion, this is a non-starter
option for the SMCARA.

On another note, I would be very careful about just voting to 'donate' club
funds for another activity such as the Robotics Club that has minimal
relation to ham radio.  The SMCARA is a very small group that exists to
foster good will among local hams and helps to keep them connected, usually
via the repeaters we sponsor; meetings; newsletters; social media; etc., so
that we all share in the fun of ham radio.   While I like Jim Forest a lot,
it is my personal opinion that, just because the requesting school
activity's sponsor is a ham, that in itself is not really a good reason to
spend the club's limited funds on Robotics equipment spares.  The Robotics
Club is a sanctioned school club and, therefore, has many options for
finding funds to pay for the requested equipment.  They can obtain funds
directly from the school system; via educational grants from numerous local
educational foundations; from interested sponsoring corporations (who CAN
benefit financially from donating money or equipment - something we can't
do); or from established service clubs such as the Lions, Elks, Moose and
Rotary that solely exist to fund this type of activity (and are incorporated
to do so).   The SMCARA's rather limited bank account contains money that is
collected from members who expect that their annual donation will be used to
further the AMATEUR RADIO hobby, whether it be sponsoring a repeater for
everyone's use; sponsoring a ham fest; paying for materials to host
technical training and licensing activities; etc.   In my mind, I would
rather use club funds to pay for these types of things or even to pay for
our administrative costs such as annual club insurance, bank service fees,
advertising, etc.

Bottom line... since we are not incorporated and have no non-profit status
with the IRS... donating money to other groups is not in our best interest
at this time and may not be appreciated by some of our membership.

R/ Pete (WA3UMY)

-----Original Message-----
From: SMCARA [mailto:smcara-bounces at mailman.qth.net] On Behalf Of Clarke,
Tom AIR4.0P NATOPS
Sent: Wednesday, November 05, 2014 2:58 PM
To: smcara at mailman.qth.net
Subject: Re: [SMCARA] Something to consider

Do we have a lawyer in the club?  Anyone married to one?

I am not a lawyer and I didn't stay in a Holiday Inn Express last night, but
my understanding is that the advantage is primarily in the realm of taxes,
so no big advantage there for us.  It would permit us to issue tax letters
for any donations to the club in kind or money. I am sure there are other
considerations, especially in regard to the swap fest, so we should get the
straight skinny.  One disadvantage would be the legal fees involved unless
we get pro bono help with the application.

Pete, I don't recall whether we investigated this in the past, do you?

Tom/W4OKW

-----Original Message-----
From: Daniel Metcalf [mailto:kb3uun at gmail.com]
Sent: Wednesday, November 05, 2014 2:20 PM
To: 'Rob Renoud'; 'Ken McNeely'; 'Stacey McNeely'; Clarke, Tom AIR4.0P
NATOPS
Subject: Something to consider

We consider ourselves a not for profit organization. Does anyone know if the
government sees us as such? My something for everyone to consider what does
it take to be recognized as a not for profit organization and what are the
benefits and drawbacks to be such an entity?

Dan

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