No subject

=93A section 501(c)(7) organization may receive up to 35 percent of its
gross receipts,
including investment income, from sources outside of its membership
without losing
its tax-exempt status.=94

Let=92s say we brought in $500 for the year, $200 of which came from this e=
vent.
Basically, this is more than 35% of our gross receipts, from, really,
non-membership
sources (it was all collected from wherever, NOT LUGOD membership). We woul=
d
lose our tax-exempt status. Someone=92s likely to ask, =93Well, what if
LUGOD donated
the excess to <something Linux-related>?=94 Wouldn=92t change the fact that=
 LUGOD
still received more than 35% from non-membership sources. No doubt there ar=
e
=93creative=94 things people can suggest, but it doesn=92t really change th=
e
reality of
where the money=92s coming from. It matters where it came from, and how muc=
h,
regardless what we do with it.

LUGOD also can=92t sponsor the event directly, even if all of its
membership voted to
do so. In outlining the rules for 501(c)(7) organizations, IRS
documentation includes
the following:

=93The statute prohibits exemption if any part of the organization's net ea=
rnings
inures to the benefit of any person having a personal and private
interest in the
activities of the organization.=94

Bill previously stated that he wants to have this retro Atari party
(as mentioned by
Bill and outlined above, it=92s really not directly/closely tied to
LUGOD or any part
of its mission statement, and many participants would be non-local and not
coming for any real reason other than Atari gaming). It also directly
benefits Bill
by reducing his costs, and potentially reducing his tax liability.

I=92m not a lawyer or a tax professional, by any stretch. But my reading of=
 these
requirements says that 1) LUGOD cannot fund this event, and 2) LUGOD cannot
be the beneficiary of this event, it would basically be a fundraiser
providing funds
from largely outside the membership.

If any person were to throw an event, and to get a discount, they claimed
=93Oh, really, it=92s a 501(c)(7) event,=94 I=92m pretty sure this is EXACT=
LY
what the letter
and spirit of the above regulation is trying to prohibit. Take it a
little bit further:
Let=92s say I don=92t want to pay taxes this year, and I want a bunch of
discounts on
events. If you were to setup a 501(c)(7), or other non-profit, and use
it in this way,
I have little to no doubt that this would be considered fraud, both by
the courts,
and by most reasonable people. Is this the purpose of LUGOD? Of course not =
=96
we hold regular events, in accordance with our mission. But realize that us=
ing
LUGOD in the manner suggested for this Atari Party is, according to my
understanding, against regulations, and therefore, we cannot do it.

The following must be said:
What I=92ve written here, I=92ve written to educate people in the group
about our IRS
and legal obligations. I believe most people in the group are not
aware of these
regulations, and are in NO way intentionally trying to violate them. I
realize that
 what I=92ve written means Bill will have to either find another venue
or another way to
fund his party, or cancel it, and I=92d hate to see that happen.
However, part of my
role as Treasurer is to be responsible for making sure that we=92re
acting in accordance
with IRS regulations. In this case, we=92d be violating (even if
unintentionally, through
lack of knowledge about them) those regulations, at least in my estimation.
It=92s part of my responsibility to prevent the group/members of the
group from making
such mistakes. To be direct: I=92m NOT trying to hurt anyone=92s
reputation, or suggest
anyone is trying to do anything sneaky or underhanded. I=92m simply doing w=
hat I
understand to be my job as Treasurer, preventing us from
unintentionally violating
regulations to which we are required to adhere. It is my hope that
people read my
comments in that light, and NOT as a personal attack on anyone.

Thanks,
Greg



On Sat, Jan 30, 2010 at 10:03 AM, Bill Kendrick <nbs at sonic.net> wrote:
> On Sat, Jan 30, 2010 at 08:16:05AM -0800, Michael Cheselka wrote:
>> Hello Bill,
>>
>> OK, I just read through all my old emails and see that this is a
>> repeat of last year.
>
> Ok, hopefully you re-read my post from last night and saw the part where
> I answered the questions from your first reply to it... but just in case:
>
>
> =A0On Sat, Jan 30, 2010 at 07:58, Michael Cheselka <cheselka at gmail.com> w=
rote:
> =A0> Am I understanding, the Atari people want LUGOD to pay $600 and one =
of
> =A0> the benifits is "free advertising"?
>
> No. =A0This event will fund itself. =A0Any residual contributions
> would go to LUGOD. =A0(e.g., if it costs, say, $654 to rent the venue, an=
d
> people/companies donate $700 towards renting a venue, LUGOD keeps the
> differnece ($46)).
>
>
> =A0> Are the Atari people not able to sponsor their own event? =A0If they
> =A0> can, then why do they need LUGOD?
>
> The benefit I'd get from LUGOD's involvement is a group with 501(c) statu=
s.
> This would cut the City of Davis rental rate to be cut in half.
>
>
> =A0> Why don't you form a AUGOD?
>
> Well considering many of the people actually involved are coming from
> great distances (almost all of the volunteers bringing equipment
> are from the Bay Area; a couple are from Davis/Sac), that would be
> a lot of effort to put into forming a group that holds one event
> a year, and has 2 or 3 local members. :)
>
> I seriously doubt I could get 501(c) status for such a group, and
> esp. not quickly enough to be able to call the City of Davis any time
> soon about renting a venue. :)
>
> =A0> LUGOD is still lending the projector and still gets free advertising=
.
>
> Heh! Good point. :)
>
> Still... having an umbrella group like LUGOD accept the funds would also
> have two other benefits:
>
> (1) it'll probably be a lot easier to convince people/companies to
> =A0 =A0donate to the event if they knew any extra would benefit a non-pro=
fit
> =A0 =A0club, and not just sit in my pocket.
>
> (2) I'm not receiving the money directly, so I worry less about taxes;
>
>
> Now, I still have at least two other choices:
>
> * See if a UC Davis student group wants to be the umbrella org. for
> =A0the event -- e.g., the CS Club at UC Davis. =A0It looks like they're
> =A0active (sorry to sound surprised; so often they have not been),
> =A0so if LUGOD seems against it, I'll try them next.
>
> * Find a different venue.
>
> =A0I already looked at the IOOF Lodge downtown, but (1) it looks like
> =A0it's just as expensive as the City of Davis resident rate
> =A0(again, 2x what it'd cost if I had help from LUGOD or CS Club),
> =A0(2) I'm not sure if it _actually_ has two separate rooms I could use
> =A0(one for games, one for film screening) and (3) parking would be a
> =A0nightmare compared to Veterans' Memorial Center and Senior Center.
>
>
>> The Atari Linux Emulators provide enough of a tie in.
>
> That makes 3 LUGOD members who feel that way. ;)
>
>
>> GP2X Wiz can run Atari 2600 games via an emulator. =A0There's also a new
>> F200 version of this device.
>
> The original GP2X can as run these emulators as well. =A0Which reminds me=
,
> I was thinking of bringing mine to the event. =A0I need to figure out wha=
t
> state it's in...
>
> -bill!
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>