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Thread: 501(c)3

  1. #1
    sbkaiser
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    Default 501(c)3

    We are starting an auxiliary and are in the process of getting our 501c3 for donations. A question came up at our last auxiliary meeting and I did not know the answer. Can the FD itself have its own 501c3 or does it have to be an auxiliary/social club that is affiliated. We survive on donations so we want to know who they should go to. Thanks!


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    Just google 501 c 3. There is a ton of information out there, including the answer to your question and many more. The FD can sponsor a corp., but they have to be established for a specific purpose, delineated in the code. There is a resource called the Minnesota Non-Profit Initiatiative or similar bland sounding government name that is an excellent resource.

    It has sample constitution and bylaws, and all of the stuff that you need to do correctly to avoid problems in the future.

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    Let's talk fire trucks! BoxAlarm187's Avatar
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    Yes, the FD can be a 501(c)3. In fact, we just changed from a (c)4 to a (c)3 a couple of months ago. I would HIGHLY suggest retaining an attorney that specializes in tax code to assist you with filing that IRS paperwork.
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    Forum Member islandfire03's Avatar
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    As boxalarm stated: A volunteer fire department can be registered as a 501c3 corporation. The IRS has very good info on their website on the process and requirements to qualify. I also would highly recommend consulting with an attorney experienced in filing these request. Once you fill out the application and get approval you will receive a letter of tax status determination.
    You will need to elect officers for the board of directors as these names will be needed for the application, and need a minimum set of articles of incorporation and bylaws to meet the requirements.

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    Check with your state's Secretary of State web site also. Normally the state is how these forms are filed. In TX that's how we have to run everything, for-profit and non-profit. In fact all I have to do is download a form from their site, fill in a few things, and for $250 or so I have any type of corporation I want, including 501c3 non-profit. Attorneys = high cost last time I checked, so also check around for someone that might help pro bono before you drop a chunk of change.

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    Just went through all this... actually we are still going through it. Our department just separated from our Village.

    First, we filed our Articles of Incorporation with the state to become a non-profit, non-stock corporation. Be careful with this step. We did ours, then when we went to file our 501(c)3 app (IRS Form 1023), we found out we were going to have to amend our Articles to meet the requirements to apply. Not a big deal, just time-consuming. So before you file your Articles, read the instructions for Form 1023. It will tell you what they need to say basically word for word. While we were filing our Articles, we got our Federal Tax ID #. That was very easy. You also have to have Bylaws. And get your Board of Directors set up. Just because you are set up with the state as a non-profit corporation, you are NOT tax exempt. You still have to apply with the IRS and be approved. Then once you get federal tax exempt, then you have to file with your state, which is much easier.

    Then the 501(c)3 application. I spent 2 months on this, literally. The instructions are extremely helpful, but VERY lengthy. I don't see a need for an attorney if you have someone that has some time to dedicate to it. If you need help with this step, let me know, I will send you a pdf file of our complete application. Some of the questions are very tricky and need to be answered in a certain way to qualify. The cost for us to apply for 501(c)3 was $750.00.

    Hope that helps some.

    Beth

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    Forum Member islandfire03's Avatar
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    Beth did a much better job of descibing the process than I did above. You do need the IRS determination letter before you start the state process or you will have to make changes after the fact. We were lucky enough to find a local law firm to do this work for us at a greatly reduced cost. All together we spent a little over $1200.00 with around $ 800.00 of that for filing fees and documentation cost. The tax attny does these all the time and knows which steps to do in the proper order to make it go smoothly.
    Ed

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    IRS User Fee of $750 and Beth's two months on the 501(c)3 forms make paying $1200 look like a good deal. If i'm getting the picture right--three main steps...
    1. File Articles of Incorporation with State and request Federal Tax ID Number--not too tough.
    2. Request 501(c)3 status from IRS--most lengthy and difficult part. Long app and $750 user fee.
    3. Back to the State to request State Tax-Exempt status.

    Finally, making sure the Federal tax return ("informational") is filed on a timely basis each year so steps 2 and 3 don't need to be repeated.

    Is that a good QUICK summary Beth or Ed??

    earl

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    Quote Originally Posted by Greenacres2 View Post
    IRS User Fee of $750 and Beth's two months on the 501(c)3 forms make paying $1200 look like a good deal. If i'm getting the picture right--three main steps...
    1. File Articles of Incorporation with State and request Federal Tax ID Number--not too tough.
    2. Request 501(c)3 status from IRS--most lengthy and difficult part. Long app and $750 user fee.
    3. Back to the State to request State Tax-Exempt status.

    Finally, making sure the Federal tax return ("informational") is filed on a timely basis each year so steps 2 and 3 don't need to be repeated.

    Is that a good QUICK summary Beth or Ed??

    earl
    Our attny. did the work probono for her time, only charged us for the law clerks time with the forms. It's tax deductable for them!
    Thats another important point Earl: make sure after jumping through all the hoops to get the determination that your annual financial reports
    {10-90?? i think not sure of #} are filed by your treasurer or accountant on time to keep from incurring the wrath of the IRS.

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    Quote Originally Posted by islandfire03 View Post
    Our attny. did the work probono for her time, only charged us for the law clerks time with the forms. It's tax deductable for them!
    Thats another important point Earl: make sure after jumping through all the hoops to get the determination that your annual financial reports
    {10-90?? i think not sure of #} are filed by your treasurer or accountant on time to keep from incurring the wrath of the IRS.
    That would be the 1099!
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    Form 990 "Return of Organization Exempt From Income Tax"

    GuideStar.org collects and makes available the IRS filings to make it easier to learn about the non-profits you might be thinking of supporting.
    Apu
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    Was going to say 1099 is what you get issued as a contract vendor showing monies paid to your company.

    Form 990 is also something that CEDAP requires if I remember correctly.

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    Forum Member islandfire03's Avatar
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    Thats the one
    The 990 filing is required annually from tax exempt corporations.
    Thanks APU !

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    Quote Originally Posted by ApuFromSpfld View Post
    Form 990 "Return of Organization Exempt From Income Tax"

    GuideStar.org collects and makes available the IRS filings to make it easier to learn about the non-profits you might be thinking of supporting.

    Ah yes, Alzheimer's is letting me know it is lurking inthe background eh? I stand corrected. Thanks for the correction Apu and Brian.
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    Digging up this old thread to let those who were interested/had asked me for information know that I got our letter from the IRS on Friday. We were approved for our 501(c)3 status. I was almost as excited as getting a 1199a update, . Turnaround time was about 2 months. Better than the possible 6 months that I heard it could take.

    Now it's time to start knocking on our new Walmart's door... and some others that were requiring 501(c)3 status to apply.

    Beth

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    Forum Member islandfire03's Avatar
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    Congratulations Beth : I know you worked hard on this.
    Ed

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    Good timing. We have been considering this for several years, in fact we went through establishing ourselves as a corporation with the state. I had a long conversation with our CPA last week, and she questioned whether or not we really wanted to go through with it. As it stands now, the city pays our insurance and some utilities. She didn't think the city could continue to cover us under their insurance if we split away from them, and wondered if we would be able to cover the cost ourselves. We are essentially living on donations now, but with the additional cost of liability insurance and insurance on the vehicles, we wonder if we could make it. How is everyone else coping with the costs?

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    Quote Originally Posted by mfra900 View Post
    Good timing. We have been considering this for several years, in fact we went through establishing ourselves as a corporation with the state. I had a long conversation with our CPA last week, and she questioned whether or not we really wanted to go through with it. As it stands now, the city pays our insurance and some utilities. She didn't think the city could continue to cover us under their insurance if we split away from them, and wondered if we would be able to cover the cost ourselves. We are essentially living on donations now, but with the additional cost of liability insurance and insurance on the vehicles, we wonder if we could make it. How is everyone else coping with the costs?
    Well my answer would be that if you split from them, you tell them that you are essentially still functioning the same way you are now. Instead of them writing checks to pay your bills, they write you one big check for the year (or however) and you pay the bills. That's exactly what we did. Our budget hasn't changed. Instead of the Village paying our bills, they give us X-dollars per year, and we pay our bills. We got all of our own insurance policies, and you know what? We cut our insurance costs in half over what the Village was paying for us.

    Your city is required to provide fire protection, so if you separate from them, and they want you to continue to operate, I would think they would work with you. Of course your situation could be way different than ours. You could present it as a benefit to them - that by separating, your liabilities become your own, essential anything that goes bad with the fire department isn't their problem anymore. That's how our change started. Things were going bad, and the Village no longer wanted that liability. But we've turned our department around so it really isn't an issue for us anymore either. Our Board is made up of members of the Village and the 2 Townships we cover - so they do still have some control.

    Beth

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    It may depend on state but when I was in PA we were considered employees of the Borough where our main station was for workmens compensation, even as a separate 501c(3). We covered parts of 7 municipalities and we were covered no matter where we responded under the Boro's insurance because of mutual aid agreements.

    As Beth said it's the responsibility of the municipality to provide protection, so they can provide the same coverage no matter what. Or if you need to split then you should be able to still be considered part of their insurance package anyway and they can just pay the costs. Or give the same amount to the department if the checks have to come from the department. Most companies don't care who gives the check, as long as it cashes.

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    Thanks for the information. We are checking into the costs of insurance, etc. As has been stated, the City is required to furnish fire protection for the citizens, but just how far does this reach? Our previous mayor was not overly pro-fire department, and stated on several occasions that if we didn't want to provide protection at the current budget amount, the city would buy a truck and start their own department, or contract with a neighboring town. As I stated previously, they cover our insurance, lights and fax line. We are required to cover heating fuel, maintenance and repairs, equipment purchases, communication equipment, etc. As it stands now, the building and all equipment are under the name of the department association (or corporation), not under the name of the City. We have no formal agreement with the City, nor the townships we cover (we have been working on this, as it is required under law). We have tried for several years to get the City involved in our department, inviting the council members and mayor to our meetings to try to understand the issues we face as firefighters, but to no avail. Hopefully things will change; we have a new mayor this year, and I was elected to the City Council. We have one other member on the City Council as well, but there are still 3 that are not overly favorable to providing us additional funding.

    Beth; I assume that since you have split from the City, you have a formal agreement (28.E or other) to provide protection?

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