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mich632

501(C)3 non profit status

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It is correct that donated labor cannot be treated as a deductible donation. Can you imagine how much we would all be able to deduct if this were legal?

 

Your painter cannot deduct for the value of his donated services. You will not be taxed on imputed income resulting from his services. Relax.

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whoa!

 

Major problem.

 

The Boy Scouts of America and the various local BSA councils are seperate corporate entities. The BSA does not own or operate the local councils. The BSA is a nationally chartered non-profit corporation.

 

The local councils are non-profit corporations incorporated in the state in which they concduct their primary business (wherever the office or headquarters is located, generally speaking). The Shawnee Trails Council INC. is a Kentucky non-profit corporation. It recently hired the Boy Scouts of America as a subcontractor.

 

Now the BSA grants a charter to each local council. This charter is sort of like a license agreement. It gives the council the authority to run the Scouting program within its boundaries. It also comes with some other rights, privilidges, responsibilities, and duties.

 

The local units are not independent legal entities (barring some unusual state laws that may be out their some place). Rather, they are part of their chartering organization. The local council grants a charter to these organizations to operate a BSA unit of a given type. Again, this is sort of like a license agreement for a piece of software. However, the council isn't granting the license to use something it owns, rather, the councils have been granted the right to grant individual unit charters as part of the council's agreement with the BSA. The BSA retains ownership of the program, the various trademarked and copyrighted materials, etc, and mearly grants permission for others to use them. In the case of councils it grants them one set of privlidges. One of those privlidges is to essentially act as the local distributor of charters to the individual organizations that actually own the units.

 

It is a rather complex but not too difficult to understand arrangement. Its primary purposes are to ease the process of managing the program (thereby allowing the program to be delivered more affectively), and in the modern world to protect say the Scouts in New York from some stupid mistake made by a troop in say Florida.

 

Incidently, it is quite possible that the rules and regulations of the BSA and the laws of an individual state may in fact conflict if there were a dispute over some council. (It is quite possible for example, that if the BSA revoked the charter of the Shawnee Trails Council, it would be able to continue as a corporation under Kentucky law, retaining its current board members and officers, no matter what the BSA tries to do about it. However, this is now a moot point due to one of the provisions of a recently signed contract between the BSA and Shawnee Trails Council INC, that requires Shawnee Trails Council to wind up its affairs and dissolve itself in a timely fashion, should BSA request it. The new contract also gives the BSA the right to ask for a new executive board to be elected. However, until this contract was signed, it was quite likely that BSA had no such authority, though ultimately it would have had to have been fought out in court by lawyers, and for a time that was a real possibility.)

 

As nearly as I can tell, the council's stock is held in equal shares by each of the charter organization. The Charter Organization Representatives excersise all the various shareholder powers on behalf of the organizations. Essentially, this amouns to electing the executive board and officers at the annual business meeting. (See what I get for reading the corporate by-laws of my council and going to a couple of meetings and reading a proposal from the BSA?)(This message has been edited by Proud Eagle)

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In my experience, the CORs don't show up for anything. So how can they conduct business at the annual meetings unless they have signed proxies?

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This has certainly gone far afield from the original question. Proud Eagle's essay is correct. The point is that the council has a separate corporate and legal existence that enables it to do certain things that scout units cannot do.

 

Having never been a COR, I would expect proxy forms to be made available to them, just as with any other corporation.

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Have to add to proud eagles post. We have a situation here in that a local business man has $$$ that he wants to use to support the Troop. He visited council as I instructed him to and they would be happy to accept his gracious donation and he was willing up and to the point they informed him that they would keep half of it for the council and then give the Troop the remainder.

 

Well he said no as he wanted "his money" to only help the scouts in "his" town. I've asked him to buy $$$ of popcorn but when he asked how much we kept of the proceeds he said "no since the boys can't use all of it." So out of curosity I called the Kentucky Secretary of States office and spoke with the person in charge of non profit corporations and she told me that it is legal in the state of Kentucky for a Boy Scout Troop to become incorporated and receive non profit status as recognized by the state of Kentucky. She also told me of several that are listed and can be looked up on the KY corporation web page. Now looking at the IRS 1023 instructions if your chartered by a church then you are already non profit as they are not required to file form 1023 form. If you can believe IRS instructions that is.

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Richmond - I've heard similar stories about gifts being donated to troops via the council. A legitimate option - if your CO is a 501©3 organization - is to have him donate it to them. They can give 100% of the money to the troop.

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Update! Did some searching and discoverd the following. Since our CO is a Ruritan Club from the National Ruritan Club web page I pulled the following. So I'm sending them an email to obtain a copy of the determination. Or CO said he doesn't think they have a tax ID number as a non profit this could be why he doesn't know. This should take care of it in our case the CO can take it and give it to us.

 

http://www.ruritan.org/foundation/index.htm

The Ruritan National Foundation and all its programs are non-profit, and non-private. All donations to the Foundation are tax deductible to the donor under section 501 © 3 of the Internal Revenue Code. Copies of the original determination letters are available upon request.

 

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BSA grants permission for community organizations to use the BSA programs. The agreement is a charter. BSA is not going to give permission for a community organization to take its name and incorporate. That's not to say somebody in Kentucky didn't do that. You could set up a corporation and call yourself "Walmart" and the state wouldn't blink an eye. The real Walmart might have a problem with it though.

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One option for some may be for the CO to act as a conduit for donations to its chartered unit. If the CO is a bona fide 501©3 qualified organization, the donor could then deduct the donation for tax purposes. It depends on status and willingness of the CO to do this. A lot of COs, just like councils, want a cut of these kinds of donations.

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Jumping in on this discussion, I am on a anothe list for Venturing and we have been debating the pros/cons of a unit filing for their own EIN number for the purpose of establishing a checking account. The chartering organization, a church, would rather we did not use theirs if possible, and we are not paying employess, withholding taxes, not collecting interest on accounts, not likely to have gross revenues of more than $25K per year, so we should not have any issues. Any "gifts or contributions" will run through our chartering organization to qualify for the tax deductible donation.

 

Anyone have any thoughts?

 

Tim

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I would be very careful about filing for EIN for your unit. Looking at the application you need a group exemption number. Which I could not find a definition or how you get one with out being a 501c3 organization. A scout unit has no legal identity and is not a legal person.

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NW Scouter is 100% correct. Scout units are not a legal entity unto themselves and do not qualify for an EIN, there are also filing requirements and liability issues with an EIN. If your CO will not let you use their tax id number then you have to create a legal entity such as Friends of Troop 55, and apply for your own bank account after you have an EIN issued by the IRS, but be aware of the legal requirements. Most major banks will issue a fee free, no interest checking accout to a scout unit without all the EIN hassles. Contrary to an earlier post, a CO is under no legal obligation to allow a scout unit to use their tax id number as it belongs to the CO alone.

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Actually, you don't need the Group Exemption Number at all. You can leave that blank. The banks require an identifier now. Period. They say it is since the 9/11 stuff, Patriots Act, etc. The bank assured me that having the EIN is no problem, as long as we are ina no interest bearing account and don't have gross revenues over $25k per year.

 

But still.....I'm trying to get the CO to cough up the EIN for our use.

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