501(c)3 - anyone one do it recently, there is a new 'short form' we are looking at.

Hello,

My Chapter (#745-White Bear Lake MN) has been looking at becoming a non-profit (501 (c) 3) for quite a while. We had some 'help', which was not much help, so we are back to doing it ourselves. There is a new (for 2015??) short form 1023-EZ that we will be using, hopefully. The one question that has come up, is what 'NTEE code' to use. Some members thing 'B11' is correct, others do not agree (Part III, question #1).

Being a nonprofit will allow several members to direct yearly donations from their employer to us, and we missing out on a NICE project plane because of not being a 501(c)3.

Thanks

501(c)(3) is for charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.

I am not sure how an EAA chapter could qualify as a charitable organization, unless you are pretty loose with the educational or scientific definitions.

Most flying clubs are 501(c)(7) - social clubs

You should probably take a look at this:

http://www.irs.gov/Charities-&-Non-P...-Organizations

http://www.irs.gov/Charities-&-Non-P...%28c%29%283%29

I don't know why a chapter would be any less educational, scientific, etc... than the National Organization which is 501(c)(3). In fact, I believe our local chapter (186) is also a 501(c)(3) from talking to one of the officers whose busy trying to make sure they stay within the rules for that. I'm on another 501(c)(3) board as well. Alas, there was no short form when we did it and we had no members who were attorneys so we had to pay one to whip our AofI into sahpe.

Is your chapter already incorporated?

I think Young Eagles definitely qualifies as educational, and a bunch of guys learning to rebuild an airplane being supervised by an A&P/AI is also educational. We also have had a booth at a local youth expo for the three years that is has occurred.

EAA Chapters cannot be flying clubs, EAA does not allow Chapters to own flying airplanes (unless this has recently changed).

Yes, our Chapter is incorporated in the state of MN and we have been sending in the 990n's (or whatever they are) for years.

All Chapters have to be a non-profit, it is part of your responsibility as a chapter and you sign off that you have this status every year in your chapter renewal. Some Chapters choose to become 501c3's. Yes, an EAA Chapter can be a 501c3, but there is not cookie cutter version of this. Because each chapter is unique with history and unique with the activities they do the IRS considers each of these requests on the merits of the request. Education is generally the reason (many chapters are heavily involved with education on safe building pracitces) though there may be a couple of other reasons cited by a few chapters. For many chapters seeking the 501c3 status is not worth it, for others it allows them to accept donationf for programming they may otherwise miss out on.

Another function you can do as part of your educational purpose is to host FAA safety seminars. You don't have to do a lot of things, but the primary purpose of the chapter would need to be educational. That includes teaching members the safe ways to build, maintain and fly aircraft.

When we applied several years ago, they seemed to spend the most time on our bylaws. The EAA version is a good starting point. They also wanted a non-discrimination policy. There's a sample one on the IRS web site that we used with some modifications to take out the irrelevant parts.

There's additional work if your organization is going to issue scholarships. That includes sending kids to the EAA Air Academy with Young Eagle funds. You have to set up a fair and well-defined selection process.

I'm not a lawyer, nor do I play one on TV, but it does look to me like B11 makes sense just by eliminating every other category. What categories do the other people suggest?
I don't have access to our original application now. It's over with our chapter secretary in Jack Benny's vault, so I don't know what we used.

Paul,

What is 'additional work' if we issue scholarships? Is this in our bylaws or just 'rules' that we must approve/share/abide by. We have given at least one scholarship for the last five or six years. The kid who was our first (I think) recipient got his private license while in high school and is currently a freshman in college in a aviation program and has his IFR license and is working on his commercial. The Chapter will be getting a cut of his salary until he retires.

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Originally Posted by PaulDow

Another function you can do as part of your educational purpose is to host FAA safety seminars. You don't have to do a lot of things, but the primary purpose of the chapter would need to be educational. That includes teaching members the safe ways to build, maintain and fly aircraft.

When we applied several years ago, they seemed to spend the most time on our bylaws. The EAA version is a good starting point. They also wanted a non-discrimination policy. There's a sample one on the IRS web site that we used with some modifications to take out the irrelevant parts.

There's additional work if your organization is going to issue scholarships. That includes sending kids to the EAA Air Academy with Young Eagle funds. You have to set up a fair and well-defined selection process.

I'm not a lawyer, nor do I play one on TV, but it does look to me like B11 makes sense just by eliminating every other category. What categories do the other people suggest?
I don't have access to our original application now. It's over with our chapter secretary in Jack Benny's vault, so I don't know what we used.

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Our Chapter met last night and we came up with a bunch of questions on the 1023 short form application for the 501(c)3. Thank you for any input you may have.

Note that we used the EAA template for our bylaws which we updated within the last two years.


#1 – We are going to use B11 for the NTEE code (part III, question #1). Some thought that B90 was possible, but most do not think so.

#2 – Do we need to send in our bylaws as part of the application? I know the application is electronically done, but how is the IRS going to know our bylaws are acceptable. Or are they going to take our word for it?

#3 – Part III, question #10 about bingo and gambling. We may in the future hold a raffle, so we think we need to say ‘Yes’. But will this cause closer scrutiny to our application? If we say ‘no,’ could we, or would we need to, later amend something if we decide to hold a raffle.

#4 – Is the required ‘electronic signature’ really a signature, or just a typed in name?

#5 – Has anyone ever had their application rejected? Why? Did you reapply? Was the reapply successful and did it cost $400 again?

#6 – A question from Marie. If EAA is a 501(c)3, why do the individual chapters also need to register as 501(c)3’s? Why cannot we tag along on the National Chapters designation?

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Originally Posted by Kim

Our Chapter met last night and we came up with a bunch of questions on the 1023 short form application for the 501(c)3. Thank you for any input you may have.

Note that we used the EAA template for our bylaws which we updated within the last two years.


#1 – We are going to use B11 for the NTEE code (part III, question #1). Some thought that B90 was possible, but most do not think so.

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I found out that our chapter is in category N99. Sports and recreation - not defined elsewhere. The EAA itself is N50, Recreational Clubs, but that says it's mostly for 501(c)7 organizations. I'm guessing the rules and categories were different back when EAA applied.
Curiously, the chapter in Oshkosh is A25 - Arts Education. If I was to do it again, I think I would choose B99 - Education, not defined elsewhere. B11 says it's for organizations that support a single other organization like a booster club or Friends of a particular library.
To see better descriptions, and examples, visit http://nccsweb.urban.org/PubApps/nteeSearch.php?gQry=allMajor&codeType=NTEE

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#2 – Do we need to send in our bylaws as part of the application? I know the application is electronically done, but how is the IRS going to know our bylaws are acceptable. Or are they going to take our word for it?

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It looks like they use the term "organizing document" for bylaws. Unfortunately, I can't see what the 1023-EZ form looks like without creating an account on irs.gov, so I can't see how they want any supporting documentation provided. When we applied, the EZ version didn't exist, so the standard 1023 form was used, and it was mailed in to Lois in a thick envelope. (Remember - don't use the word "Tea" anywhere!)

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#3 – Part III, question #10 about bingo and gambling. We may in the future hold a raffle, so we think we need to say ‘Yes’. But will this cause closer scrutiny to our application? If we say ‘no,’ could we, or would we need to, later amend something if we decide to hold a raffle.

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Raffles are different than if you were running bingo or Las Vegas night events, which is what they're interested in. They want to be sure that the games are fair, records are kept, people working are OK. and appropriate taxes are withheld. You may want to keep raffle prizes valued under $600 so reporting requirements don't kick in. Don't forget to check state and local regulations for operating a raffle.

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#4 – Is the required ‘electronic signature’ really a signature, or just a typed in name?

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The instructions say an electronic signature means checking the "penalties of perjury" box, type their name on the line, and include their title and the date.

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#5 – Has anyone ever had their application rejected? Why? Did you reapply? Was the reapply successful and did it cost $400 again?

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It's much more likely that they may come back and ask for revisions or clarifications than to outright deny. There's no additional fee for submitting the changes.

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#6 – A question from Marie. If EAA is a 501(c)3, why do the individual chapters also need to register as 501(c)3’s? Why cannot we tag along on the National Chapters designation?

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EAA is a separate organization. It would be an accounting nightmare to have to reconcile the finances of hundreds of chapters with the home office. It would also require much tighter control of the chapters by EAA, and I don't think anyone would want that bureaucratic headache.

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Originally Posted by PaulDow

Unfortunately, I can't see what the 1023-EZ form looks like without creating an account on irs.gov

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Here is the link to 1023-EZ

http://www.irs.gov/pub/irs-pdf/f1023ez.pdf

Wow; it doesn't look like they want to see the bylaws anymore. I can't see how an application could be rejected if you checked all the boxes correctly.

Is you chapter organized as a Non-Profit in MN? If so, you are already a 501c3 by statute. There is a great deal of misunderstanding about being a 501c3. I'm an Accountant by trade and we (being me doing all the leg work) just formed our new chapter - Elk City EAA Chapter 1553 Inc. EAA chapters that operate according to the 501c3 laws are 501c3's by statute - not by application! The issue of being a 501c3 in the eyes of the IRS is whether or not the organizations gross receipts (INCOME for selling something or providing a service) is subject to income taxes - not whether or not donations are tax deductible. Donations are tax deductible when given to organizations that don't pay income tax and the purpose of the organization is other than to make a profit. This brings me to the first EAA requirement that your chapter file in your state as a Non-Profit Organization. Secondly, your chapter must apply for a federal tax ID number using an SS-4 (online) and one of the questions will be are you non-profit? All non-profits must file annual 990 INFORMATIONAL returns to the IRS. If you chapter has less than $50,000 in gross receipts it can file a simple 990-N electronic post card INFORMATIONAL RETURN. The IRS will send out a reminder and there is not penalty for filing late. If your chapter does not file the 990-N within 3 years of being formed you can lose your tax exempt status, but you get it right back when you file the 990-N's. In my opinion the IRS intentionly scares people. Congress has ruled that you are a 501c3. If you operate a non-profit and you keep good records you have nothing to worry about.

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Originally Posted by Dave Hill

Is you chapter organized as a Non-Profit in MN? If so, you are already a 501c3 by statute. There is a great deal of misunderstanding about being a 501c3. I'm an Accountant by trade and we (being me doing all the leg work) just formed our new chapter - Elk City EAA Chapter 1553 Inc. EAA chapters that operate according to the 501c3 laws are 501c3's by statute - not by application! The issue of being a 501c3 in the eyes of the IRS is whether or not the organizations gross receipts (INCOME for selling something or providing a service) is subject to income taxes - not whether or not donations are tax deductible. Donations are tax deductible when given to organizations that don't pay income tax and the purpose of the organization is other than to make a profit.

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I don't agree with this advice. Mr. Hill, please cite the statute you are referring to. And please tell why you think donations to all nonprofits are deductible.

It's my understanding that there's a difference between nonprofit, and not for profit organizations. A nonprofit is to have a charitable purpose, and then donors may take a tax deduction for their contributions. A not for profit can be something like a VFW or social organization. Providing funds to those types of groups wouldn't allow a deduction.
There are several subcategories within 501(c). "3" is only one of them.

"Nonprofits" and "not-for-profit organizations" mean the same thing. Many nonprofits are not charities, many are not exempt from Federal income tax, and there are many to which gifts are not deductible as charitable contributions.

When I was in practice and a potential business (profit or non-profit) client came to me for legal advice, I would tell them that they need a good certified accountant and a passable attorney. I qualified for the latter, but they really needed the former. Looks to me like a number of EAA chapters mentioned in this thread (and probably elsewhere) need to follow my advice--GO TO A GOOD CERTIFIED ACCOUNTANT.

Cary

Just want to make sure that you all know EAA has a webinar on Tax Exempt Basics for chapters scheduled for this Tuesday, May 12, 2015. The presenter is Patti Arthur, a tax attorney that specializes in non-profit work. She has helped many chapters successfully obtain 501(c)(3) status that allows donors to tax a tax deduction. (She helped my chapter 252 obtain 501C3 status).

Sign up at www.eaa.org/webinars

I encourage you all to attend.

Just an update.

We sent in our application on March 17th and according to the letter we got back from the IRS, they approved it on March 25th. We used NTEE 'B99' (part III of the form). We did use the 1023EZ application. Cost was $400 (I am pretty sure about this), payment by 'electronic check' or whatever it is called. Other than the form, there was nothing else sent in and no follow up questions. We were previously a 'Non-profit' with the state and IRS and have been sending in 990N's for a long time.

Only problem was it took us 2 months to find the acceptance letter after someone put it in the airport's payment box!!!!

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