[5875] in APO Printshop
Non-profit rules and the current discussion (long)
daemon@ATHENA.MIT.EDU (Ellen Kranzer)
Tue Jan 5 22:44:29 2010
Date: Tue, 5 Jan 2010 22:44:27 -0500 (EST)
From: Ellen Kranzer <ccrazy@MIT.EDU>
To: apo-printshop@mit.edu
cc: Cat Thu Nguyen Huu <catthu@mit.edu>,
"Leonard H Tower Jr." <tower@alum.MIT.EDU>, Jennifer Tu <jtu@mit.edu>
In-Reply-To: <56689856-3811-48D8-B034-48016AFD6B3B@mit.edu>
Given the discussion that's going here, here's a general overview of some
of the things that apply:
501(c)3 status. 501(c)3 status is a status under federal tax law that
makes an organization 1)exempt from federal income taxes on income related
to it's exempt purposes and 2) allows people who contribute money to the
organization for the organizations exempt purposes to deduct those
contributions from their own income taxes. There are also other types of
organizations that are exempt from federal income taxes, but whose donors
don't also get a benefit.
"An organization may qualify for exemption from federal income tax if it
is organized and operated exclusively for one or more of the following
purposes.
Religious.
Charitable.
Scientific.
Testing for public safety.
Literary.
Educational.
Fostering national or international amateur sports competition (but only
if none of its activities involve providing athletic facilities or
equipment; however, see Amateur Athletic Organizations, later in this
chapter).
The prevention of cruelty to children or animals.
To qualify, the organization must be a corporation, community chest, fund,
or foundation. A trust is a fund or foundation and will qualify. However,
an individual or a partnership will not qualify." (IRS Publication 557,
Tax Exempt Status for your Organization)
501(c)3 organizations can also have income from sources unrelated to their
exempt purposes, so long as it is below a certain percentage of it's
overall income; however, it that income is subject to the Unrelated
Business Income Tax (UBIT).
"For most organizations, an activity is an unrelated business (and subject
to unrelated business income tax) if it meets three requirements:
1. It is a trade or business,
2. It is regularly carried on, and
3. It is not substantially related to furthering the exempt purpose of
the organization.
There are, however, a number of modifications, exclusions, and exceptions
to the general definition of unrelated business income."
(http://www.irs.gov/charities/article/0,,id=96104,00.html)
Additionally, there are rules about 501(c)3 organizations not competing
directly with for-profit businesses and gaining an advantage in the
marketplace because of their tax exempt status.
Having federal 501(c)3 status does not automatically exempt an
organization from taxes at the state and local level. That is up to the
individual state and some times the individual local government unit. In
Massachusetts, 501(c)3 organizations can apply for a sales tax exemption,
which applies to purchases for the organization's use. Massachusetts also
exempts land used by non-profits for their non-profit purpose (or that is
idle) from property taxes. There are other state and local taxes out there
which Mass. non-profits still need to pay.
Note, all of this so far is about taxes that organizations pay on their
own income. Sales taxes on items sold by 501(c)3 organizations is a whole
'nother ball game. If a Massachsetts 501(c)3 sells something that MA law
says a sales tax should be collected from the customer on, the 501(c)3
needs to collect that sales tax and remit it to the state.
Alpha Chi falls under two different 501(c)3 umbrellas as a subgroup of
those organizations -- M.I.T. and Alpha Phi Omega. Because MIT current
requires it, all of the chapters finances current go through MIT's
accounts. All of it's economic activity takes place under MIT's tax ID
numbers. Any IRS or state reporting gets aggregated into MIT's overall
filings.
Moving on from the purely fact based stuff to things that are a mix of
fact and my intepretation and at the danger of opening a whole can of
worms:
In terms of the pressshop and categorizing customers, there are
three categories: Internal MIT customers, APO people doing
personal jobs, and everyone else. Given that our economic activity is
under MIT's corporate umbrella, there probably isn't a
distinction between jobs for an individual, printing for
other non-profits or printing for a business. Under APOs corporate
umbrella, there is probably justification for seperating out work for
other non-profits from the other two cases.
Interal MIT customers -- basically MIT departments and other student
organizations. That's just moving money from one part of MIT to another,
regardless of the mechanics and doesn't create any problems in terms of
taxes or the rules on competing with commercial businesses.
APO people doing personal jobs for themselves -- in general, the various
laws are okay with employees/members using a non-profit group's equipment
for incidental personal use so long as the person isn't receiving
renumeration, especially if they are reimbursing the organization for
their use of the equipment (press fees). To be completely proper, APO
people doing personal jobs should be buying their own paper and paying
sales tax on it when they purchase it rather than buying from the
chapter's paper stocks purchased with the tax exemption.
All those other jobs -- we're probably not handling these properly within
the law, because properly we should be collecting sales tax or sales tax
exemption information and then reporting that to someplace at MIT which
rolls it in with all the sales from the other parts of MIT that are
collecting sales tax and then remitting it all to the state. This can of
worms is part of what leads to the policy on not doing outside jobs.
If we were working as a proper business, the business's purchase of the
paper would still be tax exempt (in general, only the final consumer pays
sales tax), but the purchase would be done with different paperwork/ID
numbers than the 501(c)3 exemption we're using; so again, some issues. In
other words, it avoids a whole lot of potential issues to just say "no
outside jobs". Historically, we haven't done that, we've done outside jobs
for people affiliated with APO that are personal or non-profit related,
rather than commerical in nature.
So, in terms of the current discussion, I think Len is correct in saying
the shop couldn't do the print job for Mims. However, as several people
have pointed out, Len violated shop protocol. Anytime a pressop sees a
problem with accepting a job for any reason -- violating shop rules,
asking for something we can't handle, scheduling issues; that pressop
should send a message to apo-printshop so that we're all aware of the
situation and nobody takes the job. The shop manager should let the
customer know that we can't take the job. This prevents situation where
either multiple people respond to the customer or nobody responds to the
customer; neither of which is good for customer relations or the chapter's
image.
Y.i.S.
ELlen
