[volunteers] (forw) updated LUG HOWTO, esp. on tax/corp. craziness

[Rick Moen]

Hi, Heather!

Quoting Heather Stern (star at starshine.org):

> Kudos to cleanups.  It's a bit wordy and risks large paragraphs lying
> unread.  It also has the weakness of only telling people what they shouldn't
> do, not offering things that they could, that might meet the needs they've
> imagined.

The scope is quite intentional and tailored:  I'm addressing particular
severe errors I keep observing recurring, in the best way I know.

(The worst verbosity is actually vague stuff in sections 2-5, inherited
from Kendall Clark.  I've been reluctant to hack those parts too
heavily, lest I offend him -- but have been slowly tightening it, as
mentioned in the document history, near the end.)


It actually perplexed me, for some years, that LUG leaders kept
gravitating to those errors:  It turned out they were making implicit
(but wrong) assumptions about tax and business law that I wasn't
sharing with them -- but wasn't aware of that difference.  

That divergent-assumptions syndrome started ringing a bell in my
long-term memory when I recalled Nicholas Anderson
(http://www.nicholas-anderson.com/), Musicians' Committee for
Anti-Nuclear Legislation (MCAL), and the nuclear freeze movement.  Cast
your mind back two decades for a moment: Reagan Administration, some of
the hottest moments of the Cold War, Strategic Defense Initiative, and
peacenik's idea of pushing for, to quote Randall Forsberg's tract, "a
mutual freeze on the testing, production, and deployment of nuclear
weapons and of missiles and new aircraft designed primarily to deliver
nuclear weapons."

Nick Anderson (professional cellist) is a friend of mine in, yes,
Berkeley, who founded his own tiny "group" (basically, himself and
whatever two or three acquaintances had recently worked as a string
quartet).  They sold tickets to their concerts, and then donated
some small proceeds to various worthy pro-disarmament groups.  And Nick
told me he couldn't really the regulatory paperwork (what "regulatory
paperwork", I thought?), so I volunteered to be his treasurer.

So, I found that Nick had, six months prior, figured that he certainly
must be operating MCAL as a political lobby; ergo, he registered it with
the California Fair Political Practices Commission as a regulated
political lobby, and was therefore filing reports every month briefing
the state on his $40 donation cheque to Dr. Helen Caldicott or whatever.

The FPPC people were bemused.  Basically, they were thinking and coming
_really_ close to saying "Why on earth are you registering your small,
and moreover, sub-mandatory-size group with our office?"  But I dutifully 
filed the forms every month for the next few years.  It turned out, of
course, that Nick was completely unaware that he didn't _have_ to file
anything, because MCAL was _way_ under their threshold for lobbying
activity they cared about.  FPPC never said so, because that wasn't
their job:  They'd gladly have kept filing MCAL's monthly reports 'til
Doomsday.


Winding the calendar back forward, I slowly realised LUGs had been
falling into the same sort of self-created pitfalls:  They were assuming
that incorporation was some sort of magic talisman.  They were assuming 
that 501(c)(3) recognition would make a huge difference in gaining
charitable donations towards their (negligible) expenses.  They assumed
they needed liability insurance, and would be getting it Real Soon Now.
They assumed they needed to fear being chased down by tax authorities
because they were collecting $1 "suggested donations" at the door.

I realised the connection when I heard in my voice the same tone the
FPPC guys had when talking to Nick:  I was thinking "You're filing for
an IRS non-profit determination letter even though you're pulling in
orders of magnitude less than $25,000 per year in revenues?  Are you
quite mad?"


> >    * The "liability shield" one can get from incorporating 
> 
> ...is mostly a social hack on the random litigous soul, to convince them 
> that what was originally a merely rude idea is also a bad idea or infeasible.

Er, no.  That is incorrect.  

As stated, it's a real shield -- but only of passive participation by
shareholders (who, for non-profit corps., are the membership).  The
usual error, as stated, is assuming it in any way inhibits suing people 
(officers, members, others) with any type of claimed involvement in the 
tortious act.  

E.g., "Someone got electrocuted at our installfest, but our volunteers
who ran the event and the victim's fellow attendees can't be sued for 
damages because we're incorporated."  Wrong.  Or "Someone claims he's 
the victim of libel on our mailing lists, but our officers can't be sued
because we're incorporated."  Wrong.

> The main effect one gets from incorporating is the ability to have
> your LUG treated as an Entity which can sign contracts.

Er, no.  That is also incorrect.  

I'm not sure that error is common enough to justify adding it to the
HOWTO:  It seems to be mostly a _local_ memetic infestation.

Heather, every single Boy Scout troup in America is an unincorporated 
association.  They enter into contracts.  They've been doing so for over
a hundred years.  (The national organisation is differently structured,
and I'm not speaking of it, here.)

How do they enter into contracts?  The people involved pick up pens, and
scribble their respective signatures onto papers.  Like that.

Oh, you forgot they could (and do) do that.  Oops.


> Owning property in the name of an org could be a reason to do so.

Guess what?  Boy Scout troups own property, too.  (It's technically the
property of sundry individuals.)

If you'd studied law, _or_ had bothered to ask a lawyer, you'd already
know that this persistent local notion that "unincorporated groups can't
own proprerty" is crap.  Loose informal associations own property all
the time.

But anyway, this digression has nothing at all to do with what I wrote
in the HOWTO -- which, by the way, was reviewed by two attorneys of my
acquaintance who currently work in the field -- and I can't see why I
should append mention of it.  If the error you're committing here
becomes widespread and problematic, I would change my mind.

[Lots more stuff snipped that has no apparent connection to the LUG
HOWTO.]

> >    * Umbrella insurance coverage against tort liability (i.e., 
> 
> ...if affordable (unlikely) is part II of the same social hack.

Sorry, I'm just not following; you are speaking so abstractly that I 
can't follow what specifically you're saying.


> Although if something happens that it covers, and you had it, at least
> it actually has a visible return.

I've already cited in the HOWTO reasons why such insurance is rather
unlikely to cover what LUG leaders assume it does.  You don't seem to be
adding anything relevant, if you'll pardon my saying so.

[snip high risk, small pool]

> Expect to be held over a barrel.

The HOWTO already gives a ballpark estimate of the girth of that barrel.


> >    * IRS recognition as a tax-exempt group doesn't mean donations to
> >    your group necessarily become tax-deductible: Automatic
> >    deductibility is reserved to _charities only_, IRS category
> >    501(c)(3),
> 
> The class of charitable status you speak of is only one of the flavors
> of 501(c)3 status... and is not restricted to churchlike orgs.  

Heather, don't try to teach Grandma to suck eggs.  ;->   Did you miss
the part where I passed the CPA exam and worked for a long time as a tax
preparer?

As should be apparent if you read attentively, I nowhere said or implied
either of the things you cite, making your comment of unclear relevance.
(Also:  You could _ask_ me about Internal Revenue Code 501(c)
subchapters; are you sure you should be _telling_ me about them?)

The statement you comment on is exactly accurate _as stated_.  I know
this from my former professional experience doing tax preparation for
CPA firms as a staff accountant, and from review of the Code, from
review of that entire section of the HOWTO by two tax attorneys -- and,
well, for gosh sakes, common sense.


> Other notes towards deductability:  people who are doing something
> that's within their *own* business' needs can usually deduct it within
> the scope of that....

Yep.  Which I consider pretty blindingly obvious, actually.  I
considered a bullet point reminding people that contributions don't need
to be "charitable" to be tax-deductible, but (1) LUGs don't typically
either get or need very much in the way of contributions in the first
place, and (2) the people giving them are typically fully aware of means
to render them tax-deductible, if why care.

Not significant enough to clutter up the HOWTO about, anyway.



> Not illegal, just extremely limited; it requires filing even more
> paperwork, and treading carefully regarding your Exempt Purpose.  You
> would be better to create an interlocking 501(c)4 which is meant for
> your political purpose.

"Illegal" is close enough to the full intended meaning of "Can cost you
your exempt status", with a savings of five words.  My legal advisors 
agreed.


> >  and must meet exacting paperwork and auditing standards. 
> 
> This is an accurate way of putting it, concise, but is true when you
> become an org of formal sort whether you attempt tax-exempt status or
> not.

Er, I _know_ it's an accurate way of putting it.  ;->

 
> This should be a seperate paragraph.

No, it's not.  That paragraph covers a single topic (with a closing
related observation) and is exactly the right size for my liking.


[Snip other stuff I already know that's not relevant to the HOWTO:]


> ...or a c6, trade organization.

For a LUG?  A _trade_ organisation?  I _really_ don't think so.  No LUG
I know of is even remotely like a business guild.

 
> Once there's a bank account someone does care... but, it is usually
> subsumed under other things, e.g. the normal taxes of whoever put
> their precious SSN on the bank's paperwork.

No, they really don't care, and they really don't want to hear from you.
That's why there's a floor under which reporting isn't even required.

Like the FPPC guys, they wouldn't say so; they'd just look at you like
you just got off the short bus.



[FVPA '97 bullet point:]

> This can be introduced with a *LOT* shorter text and increase vastly
> the chance that anyone will ever bother to read this bullet.  

Thanks, but that has exactly the scope I think required, and I was not
able to make it more concise.  Next time, parhaps.


> It's the clear definition of the role that has any value, not the
> membership status of the volunteer.

I addressed the "membership status" error because I've heard _groups_ say 
"We need you to be a formal member of our group and not just a
volunteer, in order for you to have FVPA protection."  Which is crap --
quite aside from the almost entirely illusory nature of FVPA's shield in
the first place.

That "we need you to be a member for FVPA protection" blunder was
gleaned from the pronouncements of a local group, by the way.  Something
about a summer picnic, if memory serves.



> Break the paragraph here.  #include <vivid-opinion.h>

I seldom do one-sentence paragraph -- and will not be doing one here.

 
> I'd suggest not claiming your past experience, as people seeing the
> world through rose colored glasses may stop reading at the middle of
> the sentence.  However, it's your doc, so your call.

It's actually a deliberately _forkable_ document, ever since I got
Kendall Clark to agree to CC BY-SA terms -- so in a strict sense it's
_anyone's_ call.  (People are encouraged to try out their talents.  It'd
be appreciated if they use a different title as long as I am still
aspiring to maintain this version, but that courtesy is not required.)

I seldom mention past professional experience, lest people think I'm
asking them to take what I say on pure faith -- which is lazy rhetoric,
and also tend to summon character assassins from everywhere.  And that
is not my intention.

However, I _will_ confess to desiring to wave that cudgel just long
enough to get _listened_ to, because too many LUG leaders seem to have a
lemming-like attraction to the aforementioned errors, and don't want to
stop long enough to hear _why_ they're about to make a stupid error.

I figure if they'll stop and _listen_, then they can read the law and
tax code, and see for themselves.


[TLDP:]

> They have a long history of being slow about updating their mirror of
> updated documents.

I've had pretty good luck.  They post my versions within 2-3 days.
Of course, it probably helps that I send really clean LinuxDoc or
DocBook SGML.