Hey, all. I don’t normally post in this forum but my question is kind of important.
I need to know how to set up a nonprofit agency. Me and a group of my game media colleagues are holding a fundraising effort to benefit families affected by the Virginia Tech shooting. This is going to be a joint venture, we’re calling it Gamers Against Violence Week, to prove that gamers aren’t all mindless nutjobs like certain people seem to think. Events will occur all over the U.S.; There will be an event in New York City May 5 and events in Florida, Los Angeles, and here in Carson City May 12. We need to set up a nonprofit so that we can give people tax deduction stuff if they donate stuff or sponsor us, and so that we don’t get taxed on the funds we raise.
I know people manage to set up nonprofit agencies for timely events (the foundations to benefit 9/11 victims and Katrina refugees spring to mind) and I was wondering what the fastest, most efficient way to get this done is. I got put in charge of finding out what to do and honestly, I’m not understanding the way the IRS Web site reads (even more unfortunately, we don’t have anyone else in the group who’d know any more, either). My father was on the board of directors for a small local nonprofit, but he can only help so much as he didn’t help set the thing up.
Does the IRS require a certain amount of time? How long does this usually take? Can a temporary ID number be set up while we go through the process so that the events can occur? I know that once the national organization is set up each event has to have a state ID, which varies in length; how can I go about making sure everyone gets set up with that fairly painlessly? Which state (NY, CA, or NV) would be easier to set up the nationwide headquarters through? Anyone know?
If not, it’s cool. I’m probably going to consult a lawyer on this sort of thing, and I’ll be going to the federal building first thing tomorrow morning to find out, I was just wondering if anyone here had any knowledge to share.
Have you tried calling the IRS? They have tons of supporting docs for this type of thing. IIRC you are also going to need to form a 503 corporation which will probably entail some paperwork but as I understand it, its fairly inexpensive or else you wouldnt see so many NPO’s out there.
Like everything, there are probably ways to do it fast for more money.
Incorporating IIRC is easiest in RI or DE, something like that. IANAL but I doubt there would be much in the way of leniency WRT running events before the paperwork goes through. 15 days does not sound like anywhere near enough time to me, I would assume a realistic time for this kind of stuff is more like 90 days.
You need to set up a 501 (C-3) Organization. Here is the documentation you will need. Better hurry…I don’t know if you can start taking donations without it set up, unless you accept the monies and only claim them after you get the tax status set.
And Phlosphr - That page you linked to clears up a lot of confusion, but I’m not…quite… getting it. No wonder I never became a lawyer.
Does anyone know if it’s possible for a nonprofit to start another nonprofit under the same tax ID? We were thinking maybe the guys from Penny Arcade, if they were willing, so it could be something like “Child’s Play presents: Gamers Against Violence Week.” Anyone know if that’s legal?
Yes it is legal…but you would need your own tax ID designation if you wanted to accept donations. Otherwise, you can piggy back with a verbal agreement, but I wouldn’t go into that. The legalities become hazy at best…
The problem I seem to be having with that is that because it’s tax season, it’ll take a long, long time to get it taken care of - longer than we have. I’m also having problems trying to reach my state bar association; no one answers the damn phone. I’ve checked to make sure it’s the right number and it is. I think I’m gonna wind up calling local area attorneys and see if they know anyone who specializes in this sort of thing.
But I do now know, thanks to you, that it is legal for a charity to form a subsidiary charity, but that there are complications. I’m also gonna ask about that. I’m just so confused as to how timely charities get anything done.
Looks like a great place to get started when looking for a lawyer in Nevada. Someone here might need to help you take a look to find the correct practice/case type because I don’t see “nonprofit setup” as a choice.
If nothing else, you could contact the site directly to ask for help.
Oh, and I found the link via the Washoe County Bar Association’s site, so I assume it’s legit.
My experience is only limited to assisting in setting up non-profits that are located in Texas. As far as your question, “How long does this usually take?”, it usually depends on the paperwork that you send, if it is was properly documented, and the nature of the non-profit. It used to be way easy back in the 60’s (at least that’s what I have in told), but when I did them back in the late 90’s, it is actually a process that takes time put together and get the seal of approval. One thing you have to take into account is that the IRS, through its forms, will expect a good explanation of what’s the purpose of the non-profit along with supporting documentation. I state cuz looking at the events you state seem to be taking place on May 2007. If that’s is the case, then you will not be ready with a non-profit by the dates of May 5 & 12, 2007. Unless you got some heavy duty connections in IRS, you are looking at least at a couple of months before are able to be proper non-profit.
Don’t think you can do this overnight! It takes 2-3 years, generally. The IRS forms, for example, ask for 2 years worth of financial records. They do not want to make it easy for fly-by-night groups to get non-profit status.
You can begin accepting donations before getting your IRS non-profit status, but you have some risks. If they deny you non-profit status, the donations to you then are not tax-deductible, and the IRS might go after the tax returns of your donors. Also, since you are not a non-profit, those donations were income to you, you may have to report that income on your return, and pay income taxes on it.
Frankly, I don’t see why you are trying to do this.
There are hundreds of charities that are offering aid to the school, and accepting donations targeted to that (and there are probably thousands of scams pretending to be such charities). Why don’t you work thru one of them.
Also, aren’t there already non-profit Gamer Associations in existence already? Just get one of them, which already has IRS non-profit status, to start a donations program to benefit this school. Then you don’t have to go thru all the hassle of setting up such a non-profit, and the hassle & work of convincing people that it really is a legitimate charity. (Unless I knew you, my first reaction would be to think it’s just another scam; looking it up and seeing it was just organized a few days ago would confirm my suspicions.)
…and forgot to add. If you are going to be a member of this non-profit, you must be aware that as a board member of the corporation you are liable for any negative issues that may arise which may lead to lawsuits. In which case, depending on the amount of $$ your 501 c 3 starts to receive, staff, etc, you may need to get insurance such as Directors & Officers (D&O) policy. Also, you are liable in case if the board or staff do not submit the proper quarterly and yearly reports required by IRS.
Because we are pretty much fed up with people like Jack Thompson being a dick.
Yes, there are. And if we CAN go through one of them, we will. The point is that we want to do these events. We’ve been using our extensive connections (which, unfortunately, don’t extend to the IRS) to attempt, as I said before, to get this jump started through a separate nonprofit. That’s not really something we can bank on, though.
Thanks. I’m going to send that to the one who’s in charge of the whole project. I regret bringing up the whole nonprofit thing in the first place. What a nightmare.
I have almost 13 yrs in my career in non-profits. Working from a social service provider to assisting in starting up five 501 (c) 3’s to working in conjunction with micro to large non-profit agencies. Bringing up the idea of a non-profit is not unsual and nothing wrong with it. I have met many community residents who identify a problem in the community, proceed to posit a solution, fund raise, and then get the idea of starting a non-profit. Some times it works. Most of the time it doesn’t.
And one final word of advise. If you get a board going, I highly recommend ideally that you get a lawyer (retired or practicing) that has worked on corporate law and an accountant (retired or practicing) that has at least some knowledge on 501 c 3 code and accounting.
Ugh. I just spent 45 minutes on the phone with the IRS.
Apparently there is literally no way for us to raise funds for this without being taxed. We have to have representatives from the charity we’re raising funds for there, collecting the actual money. We cannot set up our own charity because it would “Directly benefit people.” Apparently, the VA Tech fund is not a nonprofit because it “directly benefits people.” So a charity that does research for cancer is a charity; a charity that helps cancer patients pay for their bills is not.
Color me confused. But whatever. We’re going to see what we can do about getting reps from charities there.
It occurs to me that I should have asked her about things like the Make A Wish foundation…I know several charities that directly benefit people and are nonprofits. WTF? Stupid IRS.
Yes, I think you must have misunderstood something she was saying (or she said it incorrectly). Two of the non-profits I am involved with give scholarships to students in certain fields, and there are thousands of other non-profits giving scholarships. These certainly directly benefit a specific person, but that is not disqualifying.
The IRS does have to watch out for fraudulent non-profits, designed to directly benefit specific people connected to the non-profits organizers. For example, if you set up a non-profit to give scholarships to “tashabot family children” and ask gandma & grandpa tashabot and all the brothers & sister to give tax-deductible contributions to this non-profit,the IRS will, quite properly, disallow this non-profit.
The IRS deals with a lot of such scams, so they are a bit biased about this. They tend to look with a rather skeptical eye on such proposals. And after all, their main job is collecting taxes, not making it easier for people to set up new tax deductions.
She specifically said that if it benefits individuals that they may not ask for tax-exempt status. My bullshit meter is just a few hours late, is all. sighs
She is wrong. (And your BS meter is working.)
A non-profit can be organized to benefit a class of individuals, but it must be a reasonably-sized class. When that ‘class’ is so small as to be specific individuals, then it’s questionable.
Offering scholarships to children of the members of Local 123 of a union would be OK.
But if it only offered scholarships to children of the executive officers of that local, the IRS would probably challenge it – that’s just too small a group of possible recipients, and they are related to the people in charge, so those executive officers are benefiting themselves. Not a valid public purpose for tex deductions.