Goal

This page is for collecting documents and coordinating an eventual application for Federal Non-Profit Tax Exemption under part 501(c)3.

Our goal is to qualify as a 501(c)3 exempt public charity. Exemption status will come by operating as an “Community Group supporting the Arts, Science and Engineering”. Public charity status (vs. Private Foundation) will be due to being publicly supported (passing the one-third test under 509(a)2).

This would allow companies or persons to deduct donations to our Makerspace from their tax obligations. With any luck, this will encourage persons/companies to donate more and larger equipment. Additionally, it would exempt the space from paying federal tax on it’s income.

Todo

1. Make wiki page
2. Request 501(c)3 application packets from other hackerspaces
3. BoD: Request EIN (Online Application);
4. Fill out form 1023
5. Review / Revise Articles of Incorporation and By-Laws
6. Collect past and future Financial Info
7. Write Description of Activities
8. Collate packet and forward to knowledgeable party for review
9. Submit Packet
10. Wait
11. Win

“Interesting” Reading

• IRS Publication 557: Tax-Exempt Status for Your Organization

Application Packet

Forms

• Form 1023: Application for Recognition of Exemption. Instructions
• Form 2848: Power of Attorney and Declaration of Representative (Needed if we hire legal assistance)

Included Documents

When submitting attachments, every attachment should show your organization’s name and EIN. It should also state that it is an attachment to your application form and identify the part and line item number to which it applies.

Articles of Incorporation:

• Must be a stamped “Filed” copy dated by the Secretary of State (or appropriate state official)

• Must have language that expressly limits the corporation to operate only for one (or more) of the acceptable reasons as defined by 501(c)3. Those purposes that MMS can be made to resemble are: “[…] Charitable, Scientific, […] Educational”. Example:

  The corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code.

• Must have language that permanently dedicate all assets to an exempt purpose and we may also need an acceptable dissolution provision (see [IRS 82-2, 1982-1 C.B. 367]) for the distribution of our assets upon dissolution. Example:

  Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes

• Must swear off certain classes of operation (political, &c). Example:

  No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, trustees, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Article Third hereof. No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office. Notwithstanding any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by a corporation, contributions to which are deductible under section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code.

By-laws

This attachment is optional, and may not help us.

From the IRS Pub 557:

Bylaws may be considered an organizing document only if they are properly structured (includes name, purpose, signatures, and intent to form an organization)

Description of activities

From the IRS Pub 557:

Your application must include a full description of the proposed activities of your organization, including each of the fundraising activities of a section 501(c)(3) organization and a narrative description of anticipated receipts and contemplated expenditures. When describing the activities in which your organization expects to engage, you must TIP include the standards, criteria, procedures, or other means that your organization adopted or planned for carrying out those activities. To determine the information you need to provide, you should study the part of this publication that applies to your organization. The appropriate chapter will describe the purposes and activities that your organization must pursue, engage in, and include in your application in order to achieve exempt status. Often, your organization’s articles of organization (or other organizing instruments) contain descriptions of your organization’s purposes and activities. Your application should describe completely and in detail your past, present, and planned activities.

Financial Information

From the IRS Pub 557:

Financial data. You must include in your application financial statements showing your receipts and expenditures and a balance sheet for the current year and the 3 preceding years (or for the number of years your organization was in existence, if less than 4 years). For each accounting period, you must describe the sour- ces of your receipts and the nature of your expenditures. If you have not yet begun operations, or have operated for less than 1 year, a proposed budget for 2 full accounting periods and a cur- rent statement of assets and liabilities will be acceptable.

Extra Obligations

Annual Filings

• Form 990-N Electronic Postcard (so long as we gross less than $50k/yr.), otherwise we upgrade to another Form 990 variant.

• Making money in a substatially non-related business (e.g. organizing tours, any business not related to the charitable purposes of the org) requires annual Form 990-T

Paperwork Regarding Donations

• Form 8282 Donee Information Return: If we sell, exchange or dispose of a donation worth >$500 within 3 years of donation. One form per donation matching these conditions.

• Form 8283 Noncash Charitable Contributions: For non-cash donations worth $5000 or more. Qualified [Appraisal Summary] may also be needed.

• Disclosure Statement (free form): If goods or services are given in exchange for a donation (quid pro quo). Statement must:

  1. Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the ex- cess of any money (and the value of any property other than money) contributed by the donor over the fair market value of goods or services provided by the charity, and

  2. Provide the donor with a good faith estimate of the fair market value of the goods or services that the donor received

• Upon request of donor, an Acknowledgment of Charitable Contributions must be produced. It is required for a donor to deduct more >= $250 on their taxes.

  […] there is no prescribed format for the written acknowledgment, it must provide enough information to substantiate the amount of the contribution. For more information, see IRS Publication 1771, Charitable Contributions – Substantiation and Disclosure Requirements

• Donation of Vehicles (>=$500) require “spontaneous” acknowledgement document be given to the donor at the time of the donation, which may be a copy of the Form 1098-C that the makerspace would need to submit to the IRS.

• If someone were to donate patents (or other intellectual property), Form 8899 is required annually to declare the income from licensing.

• Cash donations >= $10,000 require Form 8300 Report of Cash Payments Over $10,000 Received in a Trade or Business

Other required disclosures

• We must make available upon request without charge: Our complete 501(c)3 application packet, annual disclosures from the previous three years (990-N, 990-T)