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mich632

501(C)3 non profit status

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Have any of your troops filed for 501©3 tax status? Is it worth it?

 

We recently tried to get a corporate contribution from one of our parents employeers. They do this all the time. They would not donate directly to the troop because we do not have 501©3 status. National holds that status. We tried to get them to contribute to council and have the money transfered to us. Council would not do that.

 

We tried to use our Charter Organization which is the local fire department, but they don't have 501©3 stauts.

 

Just looking for suggestions. Thanks.

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Scout Units do not qualify as a 501c. Your are a youth activity of your Charter organization. You are not and cannot become a corporation. Counicl cannot forward the money to you as that would be illegal for them to do as a 501c. So their hands are tied.

 

You as a unit should not be seeking corporate donations, that is inappropriate for a scout unit and is addressed in the fundraising guidelines of the BSA found on the Unit Money Earning Application that you are required to file with the council any time you attempt to raise funds. Units are required to offer a service or product in exchange for money.

 

There are appropriate ways for your unit to earn money. Visit your District Roundtable or contact your local District commissioner for information and suggestions.

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A Scout troop is not a legal entity. It is a program for youth used by the chartered organization. As you found out, your CO may or may not be a charitable organization. And even if it is a charitable organization, it may or may not have a determination letter from the IRS granting the 501C(3) status. No letter, no status. I'd say it would be much to big a hassle for the CO to go through the application process just to get a donation for the troop. Easier to have the boys earn their own way.

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This raises some interesting questions. BW is correct about the fact that a scout troop is not a stand alone legal entity. However, that should not necessarily be a barrier to corporate support.

 

One of the biggest employers in this area is Chevron/Texaco. They try to encourage employee involvement in community activities and will donate up to $500 to support those activities in which the employees are involved. These are typically grants for specific purposes. For example, our troop owns a laptop dedicated for record keeping purposes. When we bought our first one, the parent who was a Chevron/Texaco employee filled out some paperwork, and provided a copy of the receipt and the troop got a check. Likewise, Chevron/Texaco subsidized some purchases of cookware for our patrols in another year. Thank you all you Chevron/Texaco customers out there.

 

Now there may be a lot of ways a large corporation may handle this. They may have a pre-established foundation to use as a conduit for these kinds of community support activities. If that is what Chevron/Texaco did, then it is not a "direct" contribution.

 

While your troop is not a stand alone legal entity with any status, there is nothing to prevent you from organizing your own tax free charitable foundation to support the troop. This may be more trouble than it would be worth, but I know of at least one wealthy troop in this area that has done exactly that.

 

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Where you have a CO that is cooperative and will accept donations and then pass it onto the unit you have no problem. Out here we have many CO who are Friends or Parents of, they have no real legal existence. They are the ones that have trouble getting bank accounts (no tax id, then someone has to use theirs) or donations from corporate fund matching (no 501© 3 status).

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" Out here we have many CO who are Friends or Parents of, they have no real legal existence. "

 

Why? It takes about 15 minutes to do the paperwork to form a non-profit corporation. It may not be 501© but it gives you advantages that group of parents doesn't have.

 

 

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Sorry FOG,

 

A scout unit does not and can not qualify as a nonprofit or as a regular corporation, the BSA is the only legal entity with rights to the name. Besides even if you could form a regular corporation, which a scout unit can not do, you would be subject to corporate taxes and filings that would not be of any help to a unit and be quite costly. This is from my six years at the IRS as a corporate consultant.

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I believe what FOG is saying is that you can easily form a corporation named "Friends of BSA Troop ###". This organization can file for non-profit status, and then donate there proceeds to the troop.

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BP, I think FOG's comment was about charter organizations which are known as "Friends of Scouting" or some such name. There's no reason they can't incorporate as a non-profit and enjoy both the legal protections of incorporation and the ability to accept donations. My son's pack has such a charter org and it is a state registered non-profit corporation.

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You both are right you can form a nonprofit corp., but the trick is that it can not be affiliated with or related to the troop or pack in any way. Get the IRS publication on 501c3 corporations for more details, it is a little more complicated than people think.

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BP, you're confusing me. The Porsche Club of America is a non-profit corporation but it is not a charitable organization. There is no reason that the PCA cannot charter a troop.

 

BTW, I just read IRS pub 4420 and it sounds like a "Friends of Troop 995" would be a shoe-in for 501©.

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FOG,

 

Non profit means loosely that all money coming in goes out, minus any expenses, and that you are not manufacturing or selling an item or services for a profit that you use to build up your business. The car club is an association of hobbyists who share a common interest, they do not produce or sell services to the public. Friends of Troop xyz could also qualify as a nonprofit if their interests and officers are not the same as the troops.

 

If they tried to buy items tax exempt for the troop or the same people who handle the money in the troop handled the money in the corporation that is illegal and would forfeit their non profit status. There would be some sticky legal and tax problems if they tried to charter a scout group because the purpose and interests of the corporation and the scout unit would be the same and I am pretty sure that the charter would not be granted. Like I said before it is more complicated than you think.

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" Friends of Troop xyz could also qualify as a nonprofit if their interests and officers are not the same as the troops."

 

The officers of the troop, by definition are the officers of the Charter Organization since the troop is part of the CO.

 

"[if] the same people who handle the money in the troop handled the money in the corporation that is illegal"

 

Why? The troop is part of the corporation. That'd be like saying the treasurer of the United Methodist Church can't be the treasurer for their Boy Scout troop.

 

"Like I said before it is more complicated than you think."

 

I think that you're making it much more complicated than it is. I find it difficult to believe that all of those "Freinds of Troop abc" corporations are operating illegally. If that was the case, I'm sure that the BSA would have issued guidelines to fix the problems.

 

 

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I tried to post to this earlier today, but got timed out.

 

I defer to BP's greater expertise regarding the rules, but there are such organizations in place.

 

BP alludes to an important fact. There are many non profits that are not 501©3 organizations. In my mind the distinction is the ability of donors to treat their contributions as qualified deductible donations from their own taxes.

 

For example, the homeowners' association of which I am currently president, is a non profit organization, but it does not solicit or accept donations that people can write off against their own taxes. We pay taxes on the interest we earn on our reserve accounts, but our dues not taxable income to the association as long as it complies with a variety of other rules I do not pretend to understand.

 

It seems to me that a properly structured and operated foundation should be able to maintain sufficient independence from the management of the troop and chartered organization to meet the requirements. Too many people are already doing this around the country.

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When our troop needs money, the boys plan a carwash or a spaghetti dinner. Somehow I can't see myself advising the PLC about setting up a charitable foundation for the purpose of accepting tax deductible donations. It doesn't seem in sync with the concept of the boys paying their own way.

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