Community Association to pursue 501(c)(3) status

News July 26, 2013 0 Comments

by Pete Mazzaccaro

In recent years, members of the Chestnut Hill Community Association’s Board of Directors have openly contemplated making the organization a non-profit 501(c)(3), primarily for the purposes of fund raising. The CHCA is currently incorporated in Delaware and though it is a not-for-profit organization, it cannot accept tax deductible donations. Having a 501(c)(3) would broaden the CHCA’s options for fund raising. The CHCA’s executive committee has been exploring the option since the spring.

Last night, a motion by board member Richard Snowden to actively pursue 501(c)(3) status seemingly turned what had been an exploratory discussion into a proactive process towards making the change for good.

The motion and its passage followed a presentation by Jean Hemphill, president of the Chestnut Hill Community Fund, itself a 501(c)(3) charitable organization that oversees an endowment fund of more than $678,000. The CHCF collects money every year in the annual Community Fund Drive.

Hemphill, a partner in the law firm Ballard Spahr who said she was speaking not no behalf of the CHCF but as a professional expert in the field of non-profit law, explained a number of options the Chestnut Hill Community could pursue, including what it would do with the Chestnut Hill Local, the newspaper owned by the CHCA.

Her preference, she said, was to spin the Local into a Limited Liability Corporation.

“Why do a lot of lawyers like LLCs? They’re simpler than corporations and more flexible,” she said. “You can delegate it in a much more easy way then a typical corporation…. You can still have certain powers reserved. and any revenue the Local has would go to the CHCA so its revenue would not be taxable.”

Also, Hemphill explained, an LLC would protect the CHCA from liability in the event the Local is sued.

Hemphill described several scenarios under which the board would continue to own and manage the Local as an LLC. It could set up a managing board or manage the paper directly. It could retain any oversight it wanted in a management agreement when the LLC is formed.

The catch, Hemphill said, would be in whether or not the IRS viewed the Local as an extension of the CHCA’s mission.

“If the IRS believes [the Local] is unrelated income than its taxable,” she said. “We would have to analyze whether the Local is part of the CHCA mission. I believe it is.”

Board member Art How said there were plenty of other newspapers that operated under similar arrangements.

“There is a huge precedent,” he said, adding that protecting Local revenues from taxes “solves a huge problem.”

Hemphill said, in response to a question from board member Marilyn Paucker, that she expected the whole process would take a year.

Shortly after Hemphill concluded her presentation, Snowden offered his motion to press ahead.

“Let’s begin the process,” he said. “I don’t want to walk away from the table with endless navel gazing. We are losing ability to raise money. We’re on a ticking clock as it is. It would be refreshing if we were decisive for a change.”

There were several calls by board members to allow time for more public input and research but a majority voted in favor of the motion.

CHCA gifted $40,000 a year for two years.

Earlier in the evening, Hemphill confirmed that the CHCF has been awarded $40,000 a year for two years from an anonymous donor. The purpose of the donation is to fund an administrative assistant.

The donation fills a substantial deficit in the CHCA’s budget. The CHCA receives the money to pay for the position. A prior annual had funded the same position in thepast but expired last year.

CHCA president Brien Tilley promised that the CHCA would continue to aggressively pursue new fund raising options to be sure it would not need the donation in the future to balance its budget.

 

 

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