Resources for Starting a 501(c)(3) Peter Shaw Assistant School District Attorney

Disclaimer School Board Regulation 801.3AR Membership shall be primarily made up of parents and community members, though district employees may also be members. Shall have their own governing board, policies and accounting records, separate from the school or school district. The school principal or designee shall maintain a close relationship with booster clubs and booster organizations associated with his or her school However, school employees shall not direct or manage a booster club or booster organization for their own school, but may provide advice, including on use of the school name, mascot and/or logo Funds must be collected and maintained by the club or organization and kept separate from district funds and from student activity funds; may not use District s tax ID. Principal must give permission for use of school name/logo; fundraising done in school s name must also be approved by principal All donations must go through district-approved procedures Liability Conflict of Interest Duty of loyalty

What is a 501(c)(3) Non-profit Tax exempt federal and state Donors can take tax deduction Named after the provision in federal tax code permitting tax exemption Like a private corporation it has Articles of incorporation Bylaws Registration/filing requirements (initial and annual) Board of Directors

Must have a specific purpose 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) The prevention of cruelty to children or animals. To qualify, the organization must be a corporation, community chest, fund, articles of association, or foundation. A trust is a fund or foundation and will qualify. However, an individual or a partnership will not qualify.

Educational Foundations Education foundations are privately operated, nonprofit organizations established to assist public schools and who qualify as charitable organizations, different from school districts, public institutions or local governments A public school foundation is designed to augment, supplement, or complement programs and activities currently being provided by the district They have their own board of directors and their own staff, both paid and volunteer. Most school foundations operate as an independent entity, with no formal, legal relationship to the school district.

Resources-www.minnesotanonprofits.org/

Minnesotanonprofits.org Step-by-step process for setting up a MN non-profit Tips and advice on good governance Sample governance documents Tips on fundraising, financial management and communications/marketing

Resourceshttp://www.schoolfoundations.org/

Resources www.guidestar.org

Resources MN AG s website/charities Division

Resources-- http://www.irs.gov/publications/p557/ch03.html#en_us_2013 _publink1000200114

Government Involvement* MN Secretary of State Naming Registration Articles of Incorporation Annual Filings IRS Initial filing for tax exemption Annual filings MN Attorney General General oversight Charity Registration *Minnesota Dep t of Revenue if organization will be buying/selling products or services

Federal v. State role State Provides oversight Register with both Attorney General as well as Secretary of State Secretary of State ensures all the necessary paperwork/registration is in place initially and annually Attorney General has more of a general oversight role ensuring that funds are used for the non-profits purpose, board is governing appropriately etc. Federal No day-to-day oversight, but must register with IRS and IRS will take action to revoke tax-exempt status if merited

Nuts & Bolts of Starting a 501(c)(3) Foundation 1. Initiator(s) 2. Decide mission and purpose 3. Business plan Staff/Volunteers Fundraising Events 4. Recruit initial board of directors

5. Check for and reserve a name with MN Secretary of State

6. Write the Articles of Incorporation (Entity name, location, purpose)

Sample Articles of Incorporation

Sample Articles of Inc cont d

Nuts & Bolts of Starting a 501(c)(3) Foundation, cont d 7. Incorporate as non-profit with MN Secretary of State Articles of Incorporation are filed Filing fee MN Secretary of State will send a Certificate of Incorporation

8. Draft corporate bylaws Rule book Can be amended easily Will need to be filed with IRS

Sample bylaws

Sample Bylaws

Sample bylaws cont d

9. Hold first board meeting Approve initial bylaws Vote on new board members and officers per bylaws

Nuts & Bolts of Starting a 501(c)(3) Foundation, cont d 10. Obtain federal ID number (EIN) 11. Obtain income tax exemption Read IRS Publication 557 IRS Form 1023 IRS Form 8718 Filing fee ($850 or $400) 12. MN State Taxes Possibly apply for sales tax exemption to buy office furniture, supplies etc. MN Dep t of Revenue Form ST16 If organization will be selling products or services, or MN income tax from employees, obtain MN Tax ID number MN Dep t of Revenue Form Application for Business Registration

14. Register with MN Attorney General in certain cases. Do NOT have to register if: does not hire staff or a professional fundraiser and does not plan to receive more than $25,000 in total contributions; is a purely religious organization; or is a private foundation that does not solicit contributions more than 100 persons during a fiscal year. If you organization does need to register with AG, you must do so before soliciting contributions. File a Charitable Organization Registration Statement with a copy of the organization's articles of incorporation, IRS determination letter, and most recent financial statement. The filing fee is $25.

Note on Board Members (minnesotanonprofits.org) 3 Board member minimum (should be more) All board members should be personally committed to the mission of the organization, willing to volunteer sufficient time and resources to help achieve the mission of the organization, and understand and fulfill their fiduciary responsibilities. Nonprofit boards must have a chair and a treasurer. A vice-chair and secretary are highly suggested. The majority of the board should consist of members unrelated to each other or staff to allow for significant deliberation and diversity. Board membership should reflect the diversity of the organization's constituencies. Board members who are not employees should not receive compensation for their board service, other than reimbursement for expenses directly related to board duties. Nonprofit boards should hold quarterly meetings at a minimum. Board committees should be organized as needed to effectively structure member s roles and responsibilities.

Board members cont d Board members owe a duty of care and loyalty to 501(c)(3) Most issues with non-profit educational foundations relate to poor governance Very important to ensure board members are committed

What to do next Review resources Speak with community members Possible initiators/board members alumni, community business owners, parents, etc. Possible legal counsel contacts Pro bono http://www.mapfornonprofits.org/services/start-a-nonprofit/