Anthony DiPierro wrote:
On 4/23/06, Michael R. Irwin michael_irwin@verizon.net wrote:
Delirium wrote:
Gregory Maxwell wrote:
I'd guess the open questions would be:
- How would this impact the charitable non-profit status of WMF?
The general rule is that a non-profit organization should have at least one-third of its annual income come from a combination of: governmental donations, donations from other public charities, and small (less than 2% of total income each) donations from the general public and private charities (large donations can still have the first 2% counted). If that all adds up to less than 1/3, things get considerably more complicated.
Whether advertising income would cause a problem depends on how much we expect to get, and how much in large donations from private individuals and charities we typically get.
-Mark
Interesting information. Do you have any further detail. Is the above a good general guideline because it is mandated by law; accepted as good practice by accountants, IRS, rating organization, possible donors or other?
Presumably he is referring to the "public support test", section 509 of the Internal Revenue Code. Failure to meet the test would have the organization deemed a private foundation which would have significant negative tax effects. In extremely excessive cases the organization could completely lose its non-profit status.
Anthony _______________________________________________ foundation-l mailing list foundation-l@wikimedia.org http://mail.wikipedia.org/mailman/listinfo/foundation-l
Hmm ... from www.irs.gov search on "public support test section 509"
http://www.irs.gov/charities/article/0,,id=137609,00.html
Section 509(a)(3) Supporting OrganizationsSupporting organizations are public charities that carry out their exempt purposes by supporting one or more other exempt organizations, usually other public charities. The category can cover many types of entities including university endowment funds and organizations that provide essential services for hospital systems. The classification is important because it is one means by which a charity can avoid classification as a private foundation, a status that is subject to a much more restrictive regulatory regime. The key feature of a supporting organization is a strong relationship with an organization it supports. The strong relationship enables the supported organization to oversee the operations of the supporting organization. Therefore, the supporting organization is classified as a public charity, even though it may be funded by a small number of persons in a manner that is similar to a private foundation.
Like all charitable organizations, a supporting organization must be organized and operated exclusively for purposes described in section 501(c)(3). A supporting organization must also be organized and operated exclusively to support specified supported organizations. Moreover, a supporting organization must have one of three relationships with the supported organizations, all of which are intended to ensure that the supporting organization is responsive to the needs or demands of the supported organization and intimately involved in its operations and that the public charity is motivated to be attentive to the operations of the supporting organization. Type I supporting organizations are "operated, supervised, or controlled by" the supported organization. Type II supporting organizations are "supervised or controlled in connection with" the supported organization. Type III supporting organizations are "operated in connection with" the supported organization. Since Type III relationships are less formal than a Type I or Type II relationship, Type III organizations must meet a responsiveness test and an integral part test. Section 1.509(a)-4(i)(2) and (3) of the Income Tax Regulations. These tests are designed to ensure that the supporting organization is responsive to needs of a public charity and that the public charity oversees the operations of the supporting organization. Finally, the supporting organization must not be controlled directly or indirectly by disqualified persons (defined in section 4946), who generally are substantial contributors and their family members. Section 509(a)(3)(C).
Some promoters have encouraged individuals to establish and operate supporting organizations described in section 509(a)(3) for their own benefit. There are a variety of methods of abuse, but a common theme is a "charitable" donation of an amount to the supporting organization, and a return of the donated amounts to the donor, often in the form of a loan. To disguise the abuse, the transaction may be routed through one or more intermediary organizations controlled by the promoter.
Organizations that operate for the personal benefit of their founders are not operated exclusively for purposes described in section 501(c)(3). Where part of an organization’s net earnings inures to the benefit of private persons or where more than an insubstantial part of its activities benefit private interests, the organization will fail to qualify, or lose its tax-exempt status under section 501(c)(3). In addition, section 4958 excise taxes may be imposed on its disqualified persons and organization managers as defined under section 4958(f). Even in cases where the organization does not operate for the personal benefit of its founder, it may fail to qualify for section 509(a)(3) classification for several reasons. It might be controlled by disqualified persons. It might not be sufficiently responsive to the needs or demands of a supported public charity. It might not maintain a significant involvement in the affairs of a specified publicly supported charity. A specified public charity might not be motivated to be attentive to its operations Loss of section 509(a)(3) classification means that the organization would be classified as a private foundation, subject to excise taxes under chapter 42 for a variety of reasons including self-dealing transactions and improper investments.
_Additional information_:
/Public Charity or Private Foundation Status, Issues Under IRC 509(a)(1)-(4), 4942(j)(3), and 507,/ 2003 EO CPE Text Topic B http://www.irs.gov/pub/irs-tege/eotopicb03.pdf
/Control and Power: Issues Involving Supporting Organizations, Donor Advised Funds, and Disqualified Person Financial Institutions/, 2001 EO CPE Text Topic G http://www.irs.gov/pub/irs-tege/eotopicg01.pdf
/Public Charity Classification and Private Foundation Issues: Recent Emerging Significant Developments/, 2000 EO CPE Text Topic P http://www.irs.gov/pub/irs-tege/eotopicp00.pdf
/Supporting and Publicly Supported Organizations/, 1993 EO CPE Text Topic J http://www.irs.gov/pub/irs-tege/eotopicj93.pdf
/Exclusion from Private Foundation Status Under IRC 509(a)(3)/, 1982 EO CPE Text Topic B http://www.irs.gov/pub/irs-tege/eotopicb82.pdf
Fun stuff! I sure am glad the stacked Board is finding an excellent, licensed, bonded, high powered, high paid, unaffiliated, CPA to certify we have met all those pesky general requirements at the strategic level as well as all the properly nuanced shifty definitions referenced by link and of course the entire history of IRS case law and whatever new stuff they making up to extend the envelope as we think.
Clearly we are not a dynamic duo structure yet as most of the document discusses but perhaps some of the subprojects or new projects with large scope such as Wikiversity could become independent organizations with mutual support and accountability. Or we could seek to partner with some appropriate existing 503(s) with experience in this mutual cross checking requirement.
I wonder if Wikiversity has to be accredited before we start an endowment fund to guarantee perpetual, stable, adequate performance as a grid initilization, calibration and fuzzy logic center?
Further, I wonder if specific endowments could be established at existing accredited land, sea, space and/or air grant universities involved with distributed supercomputing to fund local redundancy assets sufficient to establish a Wikiversity Grid specific oceanstore substrate with appropriate diffusion rates, data pumping stations, backups, alerting (say parental controls or warrant specified data products) and toxic waste or bit rot repair handling provisions. Might attract some attention from Globus Developers if we used their tools to implement a full up permanent grid.
Actually I think an appropriate google search would probably turn up appropriate email contacts for all of the above should it be decided how we could usefully setup independent entities and design appropriate power control checks, balances, and audits between the various entities to meet operational and regulatory cross checking and auditing requirements.
Anybody know when some formal reports or conclusions routinely confirming the Wikimedia Foundation's tax status and compliance will be available for further assessment and planning purposes to the general public vs. the private working theaters or comm channels?
Regards, lazyquasar