Kessil

IRS issues explained

Thales

Past President
This has been explained in other threads, but I though I would consolidate it for anyone who missed it.

Our issue with the IRS was weird because they didn't get around to reviewing our application for tax exempt status for a year and a half, and when they did they had a laundry list of things that were going to prevent us from being 501 c 3. One of them was the buying and selling, on the BAR RC forum. A 501 c 3 is supposed to benefit the organization, not individuals and things like the buying and selling and frag swaps directly benefit the members more than the organization. In an effort to placate the IRS, we asked that we not sell things on the BAR RC forum while we figured it all out. As it turns out, since our laundry list was so long, it was going to be downright impossible to convince the IRS that we were 501 c3, and to a large extent I agree with them - BAR is more about benefiting the members than it is about projects that benefit the 'greater good' like the Serria Club or other big NPO's. For BAR to be benefiting the greater good, we would need something like some sort of club operated propagation system that cultured corals to return to the wild; history shows us that such projects are incredibly difficult to maintain in a club setting. There is no shame in either designation, they are just different, and I am proud that we are trying to benefit the members in propagation friendly ways. There is another IRS designation that seems to fit our club better, 501 c 4. The basic difference being that a c 3 can write tax deductible receipts for donations while a c 4 cannot. Thats really it. Since BAR has written almost no tax deductible receipts during the last 2 years, we are in the process of shifting our designation to c 4, which is much more open to activities benefiting the members directly. Now that it is figured out, selling is allowed on the BAR RC forum and on the BAR message board. Selliing prolly would have been allowed on the BAR message board even if we were c 3 because selling would have its own forum on that board so it wouldn't have seemed so blatant; on the BAR RC forum, it looked like the main purpose of the forum was to buy and sell. There was much confusion about the issue because it is confusing, and we didn't know all the information at the beginning and we didn't know how it was going to turn out. Now we do. :D
 
Just curious who advised us in the first place to try to become a 501 c3? FYI if you need help with some of this stuff in the future I will be glad to provide some input. I have been a CPA in tax for about 12 years and until this year all of it has been in public accounting with a BIG 4 firm.
 
All the other reef clubs are c3, and we followed suit figuring there would be no issues. :D If it comes up again, you'll definitely be tapped! :D
 
If you would be willing to share the "laundry list" with me, please contact me. MASNA is often asked by new clubs about whether they should go for 501 (c)3 status and I'd like to understand as much as possible about how the IRS is viewing this these days. If they are even roaming the Internet, times are certainly changing!
 
Back
Top