[Imc-finance] FYI: [P2PJ] K5 fundraising / 501(c)(3)
shane
shane at indymedia.org
Thu Jul 11 05:52:03 2002
FYI: I just read this post by rusty at kuro5hin.org on the peer to
peer journalism list at infoanarchy.org re: their fundraising and
legal status and figured indy kidz would be interested....
I think there would be merit in taking a hard look at the co-op model
as an alternative for Indymedia as it mandates self organization,
federation, and mutual aid.
in solidarity,
shane
>Delivered-To: shane@indymedia.org
>Date: Thu, 27 Jun 2002 12:00:04 +0000
>From: Rusty Foster <rusty@kuro5hin.org>
>To: p2pj@infoanarchy.org
>Subject: Re: [P2PJ] K5 fundraising
>Reply-To: p2pj@lists.infoanarchy.org
>
>Michael Sims wrote:
>>
>> On Tuesday 18 June 2002 11:39 am, Erik Moeller wrote:
>>
>> > Again, Kuro5hin.org has made some innovative changes to become a
>> > self-sustainable P2PJ community. They are now becoming a non-profit and
>> > will hold regular fundraising drives to attain the necessary budget.
>>
>> It is... interesting, certainly. I question whether Kuro5hin can
>> legitimately claim tax-exempt status, as they do not appear to fit very
>> well into any of the categories set forth under the law: charitable,
>> religious, educational, scientific, literary, testing for public safety,
>> or prevention of cruelty to children or animals. (That's assuming
>> 501(c)(3); 501(c)(7) is actually closest to Kuro5hin, but it is a form
>> that Rusty expressly rejects. :)
>
>My best guess right now is we'd be categorized under "educational". That
>seems to cover purposes like running discussions and debates. "Literary"
>seems to be very specifically geared toward print publishing, so that's
>probably not going to work.
>
>>
>> At a minimum whatever corporate structure currently exists will have to
>> be dissolved and reformed. There are a not-insignificant number of hoops
>> to jump through. If the organization pays Rusty a salary (or otherwise
>> compensates him) above market rates, it jeopardizes its status. (In
>> fact, it appears that if Rusty receives any money whatsoever from the
>> organization, there may be problems - consult a tax lawyer.)
>
>The corporate organization and bylaws will be totally rewritten,
>certainly. Paying an administrator is not at all out of the question,
>whoever it ends up being. If I apply for the job and I also sit on the
>Board (a situation which is rather likely to occur), I will be
>abstaining from any hiring decisions, naturally.
>
>There seem to be a lot people who think that being nonprofit means
>you're not allowed to compensate employees fairly. That's not true at
>all. Hiring and compensation simply has to be done in an open and
>above-board manner, and whenever someone is hired who may have a
>directorial say in the organization, they need to abstain from the
>process. A little common sense goes a long way. If you understand the
>purpose of the rules, it's easy to figure out what course of action to
>take to remain in compliance with them.
>
>>
>> All political articles on K5 jeopardize its status, as exempt
>> organizations are totally forbidden from engaging in advocacy over public
>> elections and are heavily restricted from advocating for or against
>> particular legislation.
>>
>> So the next time a story hits the queue that says, "Vote against Senator
>> X, the Disney Senator", what will the choice be:
>>
>> a) let it go and risk losing tax-exempt status
>> b) delete it by executive fiat
>
>This is currently my biggest question mark in the whole process. It's
>not worth becoming a 501(c)(3) if it means we have to ban certain
>articles or comments. I spoke to the director of e-thepeople.org, a
>nonprofit that promotes democracy and political engagement, and he had
>run into the same question founding his organization. They are currently
>operating under the assumption that the "no advocacy" rule isn't
>relevant because they are not, as an organization, sponsoring a
>particular viewpoint or interfering in free debate. That is, providing a
>place for people to speak freely is not the same as underwriting or
>advocating whatever it is they say.
>
>We've engaged a very experienced nonprofit lawyer, and this is the major
>question I have for her at this point. If that seems like a reasonable
>stance, and is not contradicted by any existing case law, then we will
>probably proceed under the same assumption. It seems that, as usual in
>the developing area of the net, the law is not particularly clear or
>well-established. My best analogy so far is that operating K5 is not
>like publishing pamphlets, but more like maintaining a public
>meeting-hall. If visitors to our meeting hall advocated political
>action, would we have to give them the boot, or merely ensure that there
>is equal opportunity for speakers with any viewpoint? It seems the
>latter makes sense, but of course we'll be finding out what case law
>says.
>
>>
>> Another note: donations aren't donations when the donator gets a benefit
>> in return. So the text ads, or t-shirts, or whatever, would not be
>> tax-deductible for the donator.
>>
>> Further, as a minor note: I question whether most contributors to K5
>> itemize their deductions. If they do not, tax-exempt status provides no
>> benefits to them.
>>
>
>There's a large gray area here. Donations are tax deductible even if the
>donor receives a "thank you gift." See public television and NPR
>fundraising. It seems that the difference is largely a matter of
>phrasing, and possibly also of cost. That is, if you have to donate $120
>to get the t-shirt gift, can anyone make a reasonable case that you're
>actually buying a t-shirt? That would be an awfully expensive t-shirt.
>
>
>> So in summary: it will be difficult (I'm not quite willing to say
>> impossible, but I think it unlikely) to be recognized as a tax-exempt
>> organization, and I see only a minor benefit to the community for doing
>> so.
>>
>
>The benefits to the community are:
>
>* Assurance of democratic operation at the organizational level. If you
>don't like decisions that the Board makes, you can vote the bums out.
>
>* Assurance that the site can not be sold to some company who will wreck
>everything that made it valuable.
>
>* Assurance that I do not personally hold the fate of K5 in my clammy
>little hands. Web community owners go broke, get burned out, find other
>projects, etc. I'm not going to run K5 for the rest of my life. If it's
>to be a real community, it should have the power to determine its own
>future, independent of me personally.
>
>Tax exemption has little to do with anything, really. In fact, if the
>free speech issues above turn out to be a serious problem, becoming a
>co-op is a backup choice. With properly written bylaws, this would
>provide all of the organizational benefits above, without any red tape
>or government hassle. For a few reasons, it's my second choice, but if
>necessary it is what we'll do.
>
>> Or to put it another way: I've seen many people/organizations state
>> "We're going to become a non-profit". To date, none of them have
>> actually done so.
>>
>
>I've seen a lot of people start web communities, too, and most of them
>fail. That doesn't mean a thing. I'm serious about this. but as I've
>said on the site, come back in a few months and judge my actions for
>themselves.
>
>
>--R
>--
>Rusty Foster :: rusty@kuro5hin.org :: http://www.kuro5hin.org
>Advertise smarter: http://www.kuro5hin.org/submitad
>
>You want your name to evoke dread long after you are deceased, not
>merely mocking repugnance once you are finally caught and locked away.
> --qpt
>
>
>--__--__--
>
>
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