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From John Webber, WALLA, Phoenix, AZ
WALLA recently incorporated and secured 501©(3) status. The process is
easy but not simple. (How’s that for a switch?) For this reason, it is
imperative that an attorney be used who has knowledge of the process.
From the membership figure, it would appear as though the group is from
a populated area where such an attorney could be found. Further, from
within the membership, there might be such an attorney, or one that would
know of such. If there are a number of candidates, check to see if any
would do the work pro bono or for a reduced fee. WALLA’s process went
quite smoothly because we had good people working on it. In fact, we received
our 501©(3) approval in less than three months.
From Sharon Simpson, Senior University, College Park, MD
A good source of volunteer assistance is SCORE (Senior Core of Retired
Executives). You can locate them through your Chamber of Commerce.
From Norm Bennett, Institute for Continued Learning, Young Harris,
GA
Incorporation doesn’t necessarily protect LLI officers or board members
from litigation.
From Ann Petersen, American University, Washington D.C.
We are indeed incorporated as a 501 (c)3. Although we were founded within
American University in 1982, we separated from them in 1989. The original
incorporation was in Delaware for tax reasons, but it was switched to
D.C. for reasons I'm not sure of..I can dig a bit deeper into the files
if you care about this. We now operate under a Memorandum of Understanding
with American University which allows us to use the words "Affiliated
with the University" on all our publications and advertising. We used
to report to the Dean, Continuing Education and Special Programs, as our
campus contact; at the moment we report to the Asst. Provost due to some
administrative re-organization on campus. We rarely talk to them though,
and have kept them at a long arms length over the years. This is actually
something I am working to reassess this year, to look for areas that would
be mutually beneficial. My office is on campus but we pay rent for the
space. Our program is held in a church building next door to the campus
and a few hundred feet from my office. We rent the educational wing of
the church Monday - Friday with classes beginning at 10:00 a.m. and ending
at 3:30 p.m.. We do not have evening classes. In order to provide a financial
cushion after the separation from the college, the LLI engaged in an Endowment
Fund drive and collected $75,000. We use the interest on the investments
as needed. We also had a major donation five years ago from one individual
which allows us a bit of flexibility. Our annual membership dues are $285.
We have one full time and one half-time paid staff; everyone else is volunteer.
The actual process of incorporation is in our files, but that information
is 12 years old now. I would be happy to dig around in there is if would
be helpful. Perhaps I could be of more help if I spoke to the director
of the LLI in question to chat about "life on the outside" of the college.
From Dolores Weiman, LIR, Jefferson City, MO
Procedure for applying for 501 ©(3) non-profit status: Apply to your Secretary
of State office for the Domestic Non Profit Instruction Sheet. This will
give you a long list of requirements for you to complete such as - Name
of Corporation – type of corporation (a public benefit corporation – You
will need an "agent." Our office manager serves this position as she receives
all mail. You will need to determine how assets will be distributed if
the LLI is discontinued. The Purpose of the Organization as well as other
obvious questions such as membership, classes, trips, etc., will need
to be decided. In Missouri, an organization with this standing cannot
participate in political activities. When this form is completed and approved,
one can then apply to the Internal Revenue District Director for "Application
for Recognition of Exemption Under 501 ©(3) of the Internal Revenue Code."
Again, you will receive a long list of questions regarding the LLI’s operation.
Examples – Descriptions of all your activities, copy of newsletter, schedule
of membership dues and a copy of the membership application. None of these
are difficult, just time consuming. The important thing at this point
is to have all financial records and history up-to-date. AND, to have
a CPA on board to help with that. It is also good if you have a lawyer
in the group to assist, although we did not really run into any difficulties.
The process can be long. Expect delays and check back to track what is
happening. The following forms were required as we sent final papers to
the IRS. Form 1023, Application for Recognition of Exemption Copies of
Articles of Incorporation Corporation By-Laws Form 8718 and a CHECK Form
872-C filed in duplicate, Form 2848 Power of Attorney Certificate of Incorporation
10. At the end of this process you will be on probation for three years
with the IRS.
Original Query from Roger Kessel, Academy for Lifelong Learning, Cape
Cod Community College, MA
1. Was your LLI able to qualify as a school for 501(c)(3) purposes and,
if not, what type of organization did your LLI qualify as to avoid private
foundation status?
2. Did your LLI file historical financial statements or projected budgets
or both in connection with its application for exemption recognition?
3. Were any questions raised by the IRS or others as to discrimination
given a mission to serve the senior population or restrictions limiting
membership to those over a specified age, for example 50?
4. In your LLI's application did it request an advance or definitive ruling?
As you can see all of the above relate to our application to the IRS for
501(c)(3) recognition. Thank you.
Another Similar Query from Stew Engel
Thanks for your prompt response. I've looked into it some & can see that
the 501(c)3 part is easy. What I'd most like to know is why you incorporated
(if on a lawyer's advice, why did he advise it) & how much it cost. Seems
to me that if you are using college property to hold your classes you
would not have a liability problem to worry about. I appreciate your help.
Responses From John E. Manion, Lifelong Learning Institute of N. Virginia,
Annandale
Our LLI qualified as a Sec 501(c)(3) organization by submitting to
the Internal Revenue Service the required Form 1023 Application for Recognition
of Exemption. Based on the application we were granted a favorable advance
ruling which ran for five years. An advance ruling period is normal procedure
in granting exemptions, we understand. At the end of the five-year period
(June 2000) IRS requested a report Form 8734 from us to determine if the
exemption would continue. The report was submitted and accepted by the
IRS. We submitted only the financial information required by the Form
1023. No questions were raised relative to discrimination.
From Shirley Stone, Guild for Learning in Retirement, University of
Wisconsin-Milwaukee
We receive our nonprofit status as part of the university. It is possible
to obtain your own 501 (c) (3) but it is an arduous process and should
involve a lawyer. It would also be necessary to file taxes yearly. It
would be far simpler to have the university provide this. Good luck!
From Dick Di Vecchio, Lifetime Learners Institute, Norwalk Community
College Norwalk , CT We have such status and we're looking for documentation
to forward to you. Incidently, it isn't such a big thing to get. And it
isn't a big thing to maintain. Should have the info shortly; I'll forward
as soon as possible. Most of the rest of your answer is coming. While
we do have college insurance coverage, we also have our own. The primary
reason for that is that on college property we're covered by our college
insurance, but off the campus (we have classes at other sites), and for
other various off-campus activities, such as member trips, conferences,
meetings, etc., the other insurance takes over. Here are the rest of the
answers:
1. We are a Section 501(c) corporation. We qualified because we..."normally
receive not more than one-third of (our) support from gross investment
income and more than one-third of (our) support from contributions, membership
fees and gross receipts from activities related to (our) exempt functions."
2. Our treasurer does not think qualifying as a school is a good idea
because of the many additional requirements that
have to be met.
3. When we initially filed, we filed one year of actual figures (all we
had at the time of filing) and three years of forecasts.
4. There doesn't appear to be anything wrong about serving only a senior
population. We had to give them (IRS) a copy of our bylaws which gives
our reason for being in the preamble (as I recall). Incidentally, whenever
we make a change to our bylaws, we send a copy to the IRS because according
to our understanding, this is required.
5. We requested an advance ruling and received it. It is not possible
to get a definitive ruling until you have been in operation a certain
period of time (we think five years, but that should be simple to check).
So first you get an advance ruling; then when the period is up, you'll
give them your annual statements and any additional statements they require
and you should get a definitive statement. In addition to the above, here
are a few more statements you may find useful:
6. You generally cannot maintain a bank account for an organization unless
you have documents permitting you to do so. A corporate entity allows
that function.
6a. Plus, a corporate entity provides financial cover for officers and
board members (The Volunteer Act not withstanding).
6b. We also felt a corporate form was more compatible for us because we
perform all our own functions, including collection of dues and fees,
curriculum formation and instruction, mailing, etc. (We also have our
own non-profit mailing permit.)
7. No one seems to remember how much it costs in the State of Connecticut
to incorporate, and even if we did, it's probably changed. It can be checked
pretty easily.
8. The fee for the IRS was about $150, again that may have changed and
can be checked fairly easily.
9. Lawyer fees would vary we suppose, but the best bet would be what we
did. Have a lawyer do it pro bono. If you have someone in you group who
is a retired attorney, I'd ask him or her.
10. Our college requires any organization using its space to have liability
insurance. We have a million dollar policy which costs us $250 per year.
11. Our treasurer answered a question, which nobody asked. The question:
Would your group prefer to handle your own financial affairs or let your
sponsoring college do it? The answer: It isn't even close! Do it yourself!!!!!
I hope this gives you the answers you need.
From Silvine Hudson, Retirement Learning at Vanderbilt University,
Nashville, TN
We at Retirement Learning at Vanderbilt did not apply for separate 501
C 3 status. We are an integral part of the University. It is our banker,
underwriter, and everything.
From Roger Kessel, Academy for Lifelong Learning, Cape Cod Community
College, MA
We are proceeding ahead largely because of a serious shortage of space.
The key driver is our desire to obtain more classroom space and ideally
at some point our own building on or, if necessary, off campus. The College
or its umbrella organization, the State University System, will not enter
into any binding agreements with us, however, unless we create a legal
entity (in contrast to our present informal association status) with which
it can contract. The second reason is to create a 501 (c)(3) corporation
under the internal revenue code so that any contributions to our effort
will be tax deductible. We will definitely open up our own bank accounts
so that we can directly manage our own finances and not be subject to
the protocols of others. These items viewed collectively all point to
greater independence and greater control over our own destiny. There are,
of course, disadvantages - not the least of which are increased efforts
and costs to administer a corporate entity which, among other things,
must make annual filings with the State and the IRS. Please do not hesitate
to e-mail again if you would like more detail or additional information.
As you know the issue of incorporation could be discussed endlessly and
I want to honor your request to be brief.
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May 17, 2008
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