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Open Source Non-Profit Portal

One Community is open source sharing all aspects of our Highest Good for-profit, non-profit, and entrepreneurial economics models. This open source non-profit portal includes:

At such point as we have an accountant on the Pioneer Team we will be able to provide more help and add additional details to this page regarding the specifics of maintaining our non-profit organization. We will also evolve this page more once we move on the property and are developing specific non-profit branches of One Community. We also recommend our Open Source Taxes page for understanding complete tax differences of operating as a for-profit vs. nonprofit entity.

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OUR NON-PROFIT DISCLAIMER

One Community non-profit, open source non-profitOur goal in open source sharing our non-profit filing and experience is to provide an example of what we wrote and how we filled out the forms. When using what we share here it is important to note that:

  1. We are not accountants and are not providing this information as filing advice or counsel and it is our opinion that documents like this are something you should have reviewed by someone specializing in non-profit organization creation before submitting your own forms. In our case we used LegalZoom.
  2. In filling out our forms it became very apparent to us that the IRS is meticulous in its requirements so it is absolutely imperative that you check to make sure you are filing based on current guidelines, forms, etc.
  3. There are a multitude of different acceptable reasons for starting and maintaining a non-profit organization and it is our experience that it is extremely important that yours be specific to your purpose and long-term plans (for reference, here are our long-term plans).
  4. Forming a non-profit organization, while it is foundational to our organization and purpose to be a duplicable model solution that creates additional solution creating models, is definitely not a necessary component of future communities, villages, and cities using our open source blueprints for duplication. While we would love to see every successive model of One Community as a non-profit entity, our methodology for global change is designed for maximum duplication including for-profit applications of our revenue streams. 

With all that said, we hope that sharing what’s needed to qualify and exactly what we sent to the IRS to get 501(c)(3) approved can save you time and money if used as a starting point to take with you when you talk to your accountant or other nonprofit organization professional. As with everything One Community creates, all information here is open source and free-shared without limitations of use.

 

TAX CONSIDERATIONS OF
NONPROFIT VERSUS FOR-PROFIT

First, when considering forming any collaborative community it is helpful to understand what it means to operate as a for-profit, nonprofit, neither, or both. There are significant differences between the taxation of for-profit and non-profit entities. Operating as “neither” would mean that the community is just a group of people living together and not having any specific entity structure.

Here is a general comparison between a nonprofit and for-profit entity:

NFP compare to FP

Here is a side-by-side comparison of the taxation rule differences between a nonprofit (NFP) organization and a for-profit (FP) business:

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PROPERTY TAXES

Property tax consideration includes location, purpose, and market value. A NFP organization might be exempt from the property tax if the whole property is used for qualified purposes. The insurance expense and coverage on the property varies. If the property is owned and managed by the company, the insurance can cover both the building and the office content. But if the property is leased from a third party, the insurance can only cover the office content.

 

SALES AND INCOME TAX

NFP organization who received tax exempt status will not be subject to sales tax and income tax, which can be huge savings for the company. However, the sales tax exemption is only valid on purchases of necessities used in qualified activities. For example, when hospitals make purchases of medicines, it will qualify as a necessary product and will be free of sales tax, but if they buy shavers to sell in the pharmacy store, this purchase will be considered unnecessary and thus will not receive the tax benefit. Similar rules apply to income tax exemptions, only the portion of income that is directly related to the qualified activities will be tax free.

 

EMPLOYEE TAXES

Employee taxes include Social Security tax and Medicare tax. The tax rate changes every year and it is calculated by multiplying a certain percentage with the employee wages. The employee tax rates are the same for NFP and FP companies. For organizations that hire unpaid volunteers, the employee taxes will be greatly reduced because the wages are considerably lower than for-profit businesses.

Click here for everything One Community filed to receive our 501(c)3 nonprofit status

 

BECOMING A NONPROFIT

Initially, One Community thought that some aspects of One Community’s revenue generating ventures like eco-tourism, sale of products, etc. would only be able to be operated as for-profit. Thanks to the help of our tax and accounting consultants, we’ve now come to believe that all aspects of One Community can be part of our nonprofit. Any that aren’t will be covered with complete details on our for-profit page.

For organizations like ours that are seeking to operate as 100% nonprofit, here are the steps you need to get started:

 

NOT-FOR-PROFIT ORGANIZATION EXEMPTION CRITERIA

Highest Good for-profit businessAs we’ve already discussed, classifying your organization as nonprofit has significant tax benefits. However, to classify any revenue generating venture as not-for-profit, you must satisfy several key criteria:

  1. It must be exclusively for exempt purposes as set forth in the 501(c)(3) application and maintenance criteria (see below). There is also a “Distribution Constraint.” This means that surplus income cannot be distributed to organizational Directors (or equivalent) as dividends.
  2. It must be “member serving or community serving.” This means the venture should benefit a particular group of people (ex: credit unions or sports clubs) or provide services to the community in general (ex: educational service or medical research) or both.
  3. Your organization as a whole must meet the 501(c)(3) organization requirements: (click here for the IRS page about this)
    1. Exclusively for exempt purposes set forth in 501(c)(3)
    2. May not be an “action organization” (attempt to influence legislation or participate in campaign activities for or against political candidates, etc.)
    3. Must not be for private interests, and no part of the earnings may inure to any private shareholders or individual(s)

If an organization fulfills the standards above, it can file Form 1023 to the IRS to apply for recognition of exemption under Section 501(c)(3). Section 501(a) focuses on other nonprofit or tax-exempt organizations. The qualified organizations under Section 501(a) can file Form 1024 to the IRS to apply for recognition of exemption.

 

HOW TO APPLY FOR TAX EXEMPTION STATUS

Highest Good for-profit businessHere are the steps you can expect when applying for tax exemption status. To help understand the paperwork, we’ve shared below copies of everything we filed when we applied for our nonprofit status.

Overview of steps for applying:

  1. Determine the right category. Will you be a Private Foundation or a Public Charity? A Private Foundation has a single major source of funding and is the default category for most organizations. A Public Charity receives funding from multiple sources, including the general public
  2. Request an Employer Identification Number (EIN). This must be done even if the organization does not have any employees. You use application form SS-4 to request your EIN: http://www.irs.gov/pub/irs-pdf/fss4.pdf
  3. Submit the application (Form 1023-series) for exempt status under section 501(c)(3). Here is what you’ll need:
  4. Include the user fees for your exempt organization. The amount of user fees varies, you can use this link to find one that matches your organization: http://www.irs.gov/irb/2017-01_IRB/ar11.html#d0e18567
  5. Double check you have everything ready. Here is a step-by-step review to use to double check your work: http://www.irs.gov/Charities-Non-Profits/Application-Process
  6. Submit the complete application portfolio to the Internal Revenue Service (IRS)
  7. Public inspection after receiving the tax exemption. The organization needs to have its approved application with all supporting documents and last three annual reports ready at all times for public inspection.

Additional Note: If you intend to apply for 501(c)(3) status, you must notify the Internal Revenue Service within 27 months from the date of formation if you desire to be treated as a 501(c)(3) from the date formed.

 

NONPROFIT ANNUAL REPORTING AND FILING

The IRS requires tax exempt organizations to file annual returns. There are some exceptions, click here for details. Here is an overview of what is required.

  • The forms to be filed as annual return depends on the nonprofit’s financial activities
  • File Form 990-N for organizations whose gross receipts are normally < $50,000. (Most small tax-exempt organizations whose annual gross receipts are normally $50,000 or less are required to electronically submit Form 990-N, also known as the e-Postcard, unless they choose to file a complete Form 990 or Form 990-EZ instead).
  • File Form 990-EZ or Form 990 for organizations whose gross receipts are <$200,000 and total assets are <$500,000.
  • File Form 990 for organizations whose gross receipts are >$20,000, or total assets are >$500,00.
  • File Form 990-PF for private foundation, regardless of financial status.

 

DUE DATES FOR NONPROFIT ANNUAL RETURNS

The initial return date is the 15th day of the fifth month after the organization’s ending date of tax year, the first extended due date is the 15th day of the eighth month after the organization’s ending date of tax year, and the second extended due date is the 15th day of the eleventh month after the organization’s ending date of tax year.

For example, an organization’s ending date of tax year is December 31, its initial return date would be May 15th, the first extended return date would be Aug. 15th, and the second extended return date is November 15th.

If a due date is not on a business day, the due date is delayed until the next business day.

 

PUNISHMENT FOR FAILURE TO FILE AN ANNUAL RETURN

According to section 6033(j) of the Internal Revenue Code, organizations that do not file for three consecutive years automatically lose their exempt status. An automatic revocation is effective on the original filing due date of the third annual return or notice.

The IRS posts the list of organizations which fail to file an annual return for three consecutive years. These organizations are no longer exempt from federal income tax. Consequently, they may be required to file Form 1120 or Form 1041 and pay applicable income taxes. Furthermore, these organizations are not eligible to receive tax-deductible contributions and will be removed from the cumulative list of tax-exempt organizations provided by the IRS.

However, these organizations have opportunities to reinstate their tax-exempt status in four different ways. You can read more about this here.

VISIT OUR OPEN SOURCE TAXES PAGE FOR ADDITIONAL DETAILS

 

OUR NON-PROFIT FILING
TIMELINE EXPERIENCE

open source, One Community non-profit organization, how to start a non profit image, global change, free-sharing help, Highest Good for-profit businessTime to fill out all the paperwork and make sure we had all the necessary documents was over 100 hours due to the fact we were still evolving One Community and needed to research many of the specifics requested. One Community incorporated in May of 2011, we filed for non-profit status in November, got notice by mail in January 2012 that our form would need to be reviewed in detail before approval, and went through the process of answering specific questions with a reviewer when our turn came up in July 2012 – at which point we were approved within a couple weeks.

 

OUR NON-PROFIT ORGANIZATION
ORDER OF SUBMISSION

Highest Good for-profit businessIn our experience the IRS made it VERY clear that the order of submission was important but there was enough conflicting information for us to feel a little confused at exactly the order to actually put all documents. After much reading and research for clarification, here is how we ended up putting them in order for mailing from top to bottom:

  1. 1023 Checklist
  2. 1023 Application
  3. Attachment to 1023 word doc (inc. Schedule H) + Community Application and Residency Agreement
  4. Conflict of Interest Policy
  5. Articles of Incorporation
  6. Bylaws
  7. Printout of Website
  8. Conflict of Interest Policy (again)

 

OUR NON-PROFIT ORGANIZATION DOCUMENTS

Highest Good for-profit businessClicking links below will open new windows with the PDFs of all documents listed. You can then save or print them. When reviewing or referencing these documents, please keep in mind that they were completed for the specific goals of establishing One Community as a non-profit teacher/demonstration hub. Different goals will necessitate a different filing and you should always consult a professional to help you when submitting something this important.

  1. One Community 1023 Checklist
  2. 1023 Application (30 MB file so it might take a minute for the preview to load)
  3. Attachment to 1023 word doc (inc. Schedule H), Community Application, and Residency Agreement
  4. Conflict of Interest Policy
  5. Articles of Incorporation
  6. One Community Bylaws
  7. Printout of Website (we printed the top 15 key pages)
  8. Conflict of Interest Policy

 

ADDITIONAL NOTES REGARDING NON-PROFIT DOCUMENTS

  • Personal information and EIN details have been removed
  • You may notice many of our details on the website have evolved far beyond what is in our original non-profit application

 

FREQUENTLY ANSWERED QUESTIONS

There are currently no frequently asked questions for this section. If you have one, please use our contact us page to ask it and we will answer it for you and use your question to make this page better too.