fred johnson 936 Posted November 5, 2014 Share Posted November 5, 2014 ... First' date=' the EIN is NOT evidence of tax exempt status. ... It does not affect your actual tax status, nor does it impose any requirements of reporting. Individuals have a form if EINs as well - we call the Social Security Numbers. SSNs are now issued to infants (I got mine when I was 11 as part of a school project). [/quote'] Your points are correct. It's not that the EIN imposes any requirements, it's that the EIN starts the process and the process has some rules. Like declaring your tax exempt status. Like being legitimately and legally setup. It's not that the EIN creates requirements, it's that the EIN makes the requirements much more visible. It's that the EIN is the start of declaring the legal state of an entity. We just deposited $12,000 from our fall fundraiser into the checking account. I'm sure that triggered a flag to the IRS about large cash deposits. If we don't set ourselves up correctly, we could owe sales tax and income tax. I'm just saying ... learn and do it right. Note also the "insubstantial/substantial" language - the IRS has defined 30% as substantial for individual benefit - if you do fundraising shares' date=' that means that if you credit a Scout with $30, it is a substantial amount; and they've defined 2% as insubstantial so if you credit them with $2, it's insubstantial. Does that mean it's ok to credit them $2? No - its still illegal. What the language sets is the thresholds for IRS enforcement. The IRS has determined that 2% of individual benefit is just not worth their enforcement time but that 30% is. The amounts in between? Still to be determined - don't think for a second that they won't enforce at 20% sometime down the road.[/quote'] Actually, you are only partially correct. Legal / illegal wasn't discussed. What is discussed is whether a non-profit can keep non-profit status when fund raising benefits members of the non-profit. IRS has defined 30% as the clear personal benefit threshold and puts non-profit status at risk. IRS has said that 2% is clearly below the personal benefit level and does not put non-profit status at risk. Between 2% and 30% is the debateable area. IRS recognizes that often non-profits have to spend money to raise money. So the rules allow giving some level of private benefit as long as the substantial amount of fund raised benefits the non-profit as a whole. The concept is that some private benefit will directly cause greater benefit to the whole non-profit cause. Link to post Share on other sites
SeattlePioneer 144 Posted November 5, 2014 Author Share Posted November 5, 2014 < What's this got to do with setting a good example for our boys when it comes to teaching the boys to honor the laws of our country whether we agree with them or not. Most local health departments have extensive rules so that they can point to violations should any ordinary activity go bad. And as long as nothing is offered for sale, one can have all the potlucks they wish without any governmental interference, but If one were to look closely at the health laws most don't apply to these kinds of setting so the food police aren't going to show up at your Blue Gold and haul the CC off in cuffs. A number of years back they tried to step in and regulate church potlucks and such. There was such an uproar the rescinded that effort before it even got off the ground. Never mess with the church ladies. >> Oh, I'll bet your local health department has rules reuqiring licenses and permits even if you give away food. You just ignore those rules because you find it convenient to do so and the health department isn't likely to care unless someone makes a complaint or problems are encountered. Similarly, you thunder about "fraud" but I doubt you even know what it means. You are behaving like a pious blowhard with these exagerated statements and claims, in my opinion. The fact is you have NO expert knowledge of how government organizations like the IRS behave with respect to small groups like Scout units. You are just guessing and supposing how they act because it suits your biases. Get a grip. Link to post Share on other sites
Stosh 3452 Posted November 5, 2014 Share Posted November 5, 2014 I don't know what your agenda is, but if you were to carefully read about the IRS rulings and the similar comments Calico, Fred and I are talking about you will find them quite similar. So singling me out to rant about my treasurer handing ont cupcakes illegally is of very little if any consequence to me. I'll try not to copy/paste exaggerated quotes from the IRS website from now on. "The lady doth protest too much, methinks." - Wm. Shakespeare, Hamlet, 1602. Maybe Shakespeare was a pious blowhard too, or at least Gertrude was.... Stosh Oh, and BTW, when did I say anything about how the IRS does or doesn't work. I only pointed out the IRS policies, and didn't comment on whether or not they ever enforced them. I did, however, comment about teaching our youth the moral way of dealing with such policies whether they are enforced or not. I'm thinking your thought processes would allow driving 5 miles over the legal speed limit thinking it was okay as long as you didn't get caught. Generally the police don't enforce 5 over, but that doesn't make it any less illegal. I have had a number of parents, and scouters badger me because when I drive, I drive the speed limit. I'm always the last to arrive at camp. Doing things right doesn't make one a pious blowhard, it just makes them legal. Link to post Share on other sites
fred johnson 936 Posted November 5, 2014 Share Posted November 5, 2014 ... handing cupcakes illegally is of very little if any consequence to me. Cupcakes would be applicable under .... IRS publication 535 on business expenses (http://www.irs.gov/pub/irs-pdf/p535.pdf) .... IRS publication 526 on charitable contributions (http://www.irs.gov/publications/p526/) depending on whether you are expensing the cupcakes or accepting the cupcakes as a donation. You may also have other tax advantages depending on glueten free, sugarcane source and whether the cupcakes are being donated as relief to a natural disaster. ... since we're going over the top on the subject ... 1 Link to post Share on other sites
Stosh 3452 Posted November 5, 2014 Share Posted November 5, 2014 Love it! Stosh Link to post Share on other sites
CalicoPenn 729 Posted November 5, 2014 Share Posted November 5, 2014 Lets make sure we understand something - there is a difference between private benefit and individual inurement. Individual inurement entails personal enrichment of members of the organization. Raising funds for a pack or troop then have scout accounts credited with a percentage of the funds raised personally enriches the scouts, and thats individual inurment, and that's not allowed by the IRS (and leave it to the BSA to provide information that misses the point). Private benefit would be more along the lines of, as an example, a lake association raising funds from the general public for lake improvements and spending all the money on a lake without general public access. That would be 100% private benefit to the property owners around the lake. If the lake has general public access, then the percentages come in to play - as long as the funds expended benefit the general public by at least 70%, you should be ok. Under that scenario, one or more of the private properties on the lake might get shoreline enhancements which would be a private benefit but as long as its in the gray area of under 30% of the total funds raised (at this time), it should be ok. It would be rare for a pack or a troop to fall into trouble under private benefit provisions because the BSA is open to membership from the general public, the boys are considered part of the general public, and therefore the money a pack or troop spends on the equipment and program is seen as being spent for the benefit of the general public. The IRS does understand that non-profits may need to spend money to make money - spending money with a printer to make up flyers is not giving a private benefit to the printer - it's just expending money on behalf of the troop/pack. Link to post Share on other sites
Stosh 3452 Posted November 5, 2014 Share Posted November 5, 2014 Calico, The problem lies in the efforts of the IRS going after such organizations as Booster Clubs. They all rely on a tax-exempt status, but are often found to be giving individuals credits rather than expending for the welfare of the whole team. The IRS has stepped in and fined these people big time when this happens. Are are a number of ways that Booster Clubs are getting around this. Instead of being an independent tax-exempt organization they become "part of the school" they are boosting for, thus relying on the schools tax-exempt status instead of one of their own. This is the same as a scout unit relying on the tax-exempt status of it's CO. However, if the CO is not a tax-exempt organization, they will need to become an independent tax-exempt organization, with legal status and file an annual tax form to maintain it. Fees for the annual report will also need to be paid. It's complicated, but doable. Simply being a BSA unit does not automatically grant tax-exempt status to the unit. They do not fall under the umbrella of BSA because they are "franchised" off to CO's and are exclusively owned by the CO's and fall under the CO's legal status, not BSA. The way the Booster Clubs got into trouble is they did not establish themselves under a tax-exempt entity, i.e. the school or one of their own creation and when caught, were obligated to pay back taxes, penalties and fines which often was more than what they had taken in. Of course all those who claimed charitable contributions on the organization were also at risk. While a few units do go through the motions and make sure they are covered and at no risk, there are others out there that are pretty much free-wheeling it and/or doing strange things like setting up their own EIN thinking they are "automatically" a tax-exempt business entity. Unfortunately they are not. And while playing the odds on not getting caught at it has pretty good odds, the Booster Clubs all of a sudden found out those odds were overnight, stacked against them. What's not to say that after they get done with the Booster Clubs they don't set their sights on the next source of tax revenue. Let's see, who's taking in a ton of money under questionable setups? I can withstand an IRS audit, but can everyone say that? Stosh Link to post Share on other sites
SeattlePioneer 144 Posted November 6, 2014 Author Share Posted November 6, 2014 < >> Now that Obama's IRS has finished going after Republicans, no doubt they will be targeting Cub Scout packs next.... Has anyone heard of a Cub Scout Pack or Boy Scout Troop being audited by the IRS? Link to post Share on other sites
Stosh 3452 Posted November 6, 2014 Share Posted November 6, 2014 < >> Now that Obama's IRS has finished going after Republicans, no doubt they will be targeting Cub Scout packs next.... Has anyone heard of a Cub Scout Pack or Boy Scout Troop being audited by the IRS? And once again the point is missed. Driving 60 mph in a 55 mph zone is illegal whether one gets caught or not. So are going to teach, by example, our boys to drive 55 or 60? Everyone can decide that for themselves. Over the past many years, back-seat drivers have often warned me about speed traps along the road. Some of them even commented about my not being observant because I didn't slow down. Well when one has their cruise control punched in on the speed limit, one doesn't have to slow down, nor do they need to be watching for speed traps. I don't know if anyone has heard of a BSA unit being audited, but my unit cannot be audited. It is owned by the CO and uses their EIN and falls under their tax exemption. The IRS doesn't even know we exist. And that's the way I like it. Stosh Link to post Share on other sites
CalicoPenn 729 Posted November 6, 2014 Share Posted November 6, 2014 Stosh, The problem the booster clubs had were related to individual enrichment, a problem that wouldn't go away by operating under their schools exempt status instead - the school can't allow for individual enrichment either - hopefully, the school would have better review and control of expenses to prevent it from happening. Will the IRS be auditing scout units? Unlikely anytime soon but understand, the IRS has been gearing up to start more intensive reviews of non-profit organizations (which is why the IRS was scrutinizing those "republican" applications more closely (and obviously, Seattle, you never bothered to keep up with the story, or research beyond what some joker in the right wing mediasphere told you, or you would know that they also targeted progressive organizations with the same level of scrutiny and the same amount of delays and that the only organization actually denied status was a progressive group) and that it could happen sooner than later. Link to post Share on other sites
Stosh 3452 Posted November 7, 2014 Share Posted November 7, 2014 And if your unit has their own EIN and tax-exempt status they are on the IRS's radar. Not really were I want to be considering the "reputation" the BSA has with governmental entities. Stosh Link to post Share on other sites
Stosh 3452 Posted November 7, 2014 Share Posted November 7, 2014 Stosh, The problem the booster clubs had were related to individual enrichment, a problem that wouldn't go away by operating under their schools exempt status instead - the school can't allow for individual enrichment either - hopefully, the school would have better review and control of expenses to prevent it from happening. Will the IRS be auditing scout units? Unlikely anytime soon but understand, the IRS has been gearing up to start more intensive reviews of non-profit organizations (which is why the IRS was scrutinizing those "republican" applications more closely (and obviously, Seattle, you never bothered to keep up with the story, or research beyond what some joker in the right wing mediasphere told you, or you would know that they also targeted progressive organizations with the same level of scrutiny and the same amount of delays and that the only organization actually denied status was a progressive group) and that it could happen sooner than later. Yep the ISA is why BSA came out with their new policy. They are trying to protect their people even when they refuse to be protected. Stosh Link to post Share on other sites
RememberSchiff 3661 Posted November 7, 2014 Share Posted November 7, 2014 Your points are correct. It's not that the EIN imposes any requirements, it's that the EIN starts the process and the process has some rules. Like declaring your tax exempt status. Like being legitimately and legally setup. It's not that the EIN creates requirements, it's that the EIN makes the requirements much more visible. It's that the EIN is the start of declaring the legal state of an entity. We just deposited $12,000 from our fall fundraiser into the checking account. I'm sure that triggered a flag to the IRS about large cash deposits. If we don't set ourselves up correctly, we could owe sales tax and income tax. I'm just saying ... learn and do it right. Strange there is no information collected about unit finances at chartering. For example does the CO or unit have an EIN, Who is the treasurer.. Where is the unit checking account(s)? What unit financial information should be documented at rechartering? Unless there is a downsizing of the IRS, I expect increased IRS oversite into charitable non-profits. If the FBI can ask for membership information from a Council, I imagine the IRS can ask for unit financial information from Council Another $0.02 Link to post Share on other sites
Stosh 3452 Posted November 7, 2014 Share Posted November 7, 2014 At rechartering I would assume that all these items were handled correctly when the unit formed. Unless the CO changes, everything should be unnecessary to review. However, if these things were not set up correctly then it could be a problem. If a unit has their own EIN and tax-exempt status it shouldn't matter if they jump from one CO to another. They're operating independently of the CO as far as the IRS is concerned and outside the expectations of the BSA. Legally the CO owns the unit and if the unit has it's own EIN and independent bank account, if they move to another CO and take the money under their EIN, it amounts to double bookkeeping and those funds are hidden from the CO and when taken, amount to theft as well. About the only time anyone gets any information on these things is when a unit is formed or when the CO changes (but only if you ask). The unit may move to a new CO, but the bank account is still under the old CO's EIN. To "keep/transfer" that money amounts to theft. It belongs to the old CO. Go to the new CO, get their EIN, set up a new account and start over with a zero balance. And yes, I have dropped my position as a Crew Adviser because my committee pull these kinds of shenanigans and I didn't want any part of such things. The tax exempt issue is altogether different. Either the unit has one of their own under their own EIN or they are covered by their CO's tax exempt status if they are using the CO's EIN. If they are using their own EIN they have to have their own tax exempt documents. If they went out and got their own EIN and then assumed they are covered by BSA or CO tax exempt status, they have assumed incorrectly. And seriously? I don't know what happens to the Agreement between the CO and BSA if the unit has it's own independent status with an IRS issued EIN. If the unit us chartered under a fraternal organization, I don't know how all that works but would need to be checked out to make sure the unit is covered with the appropriate legalities. With the number being an Employer Identification Number (EIN), it means that the IRS has assumed the entity has set itself up as a business capable to having employees under some legal status. Further application is necessary to establish not for-profit status absolves it from having to pay income and sales taxes on their income and expenses. They still must file an annual tax return stating their status. Otherwise, all purchases are subject to sales and use taxes and all money taken in is subject to corporate income taxes. I don't know how it works for a tax exempt CO to own another for-profit business, or worse yet, let the IRS know it is a business entity without having filed and maintained the correct legal documents for that entity. Now it needs a lawyer to sort it all out. Stosh Link to post Share on other sites
fred johnson 936 Posted November 7, 2014 Share Posted November 7, 2014 Strange there is no information collected about unit finances at chartering. For example does the CO or unit have an EIN, Who is the treasurer.. Where is the unit checking account(s)? What unit financial information should be documented at rechartering? Unless there is a downsizing of the IRS, I expect increased IRS oversite into charitable non-profits. If the FBI can ask for membership information from a Council, I imagine the IRS can ask for unit financial information from Council Another $0.02 "I THINK" this is intentional. It takes time and energy to collect information that is useful. And what would you do with the info? And how would you protect the info? Plus it might scare away potential charter orgs. Also, it might also create BSA / council liability if it discovered issues and did not act. Heck, charter orgs don't even need to be non-profits. They could be a regular business. I know most business owners don't like sharing that info even if it's already available. As long as the entity wants to charter a scout group and fulfills the requirements on the agreement, I doubt BSA or a council would say anything. Link to post Share on other sites
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