Re: [alpacapolitics] Re: [AlpacaTalk] UBIT taxes and non profit status-from the IRS website
Question:
If dues are part of the marketing budget and all of that is going to the ALC, are the dues going there too? If that is the case, there is no reason for AOBA to continue. Please clarify this for me.
Yes the benefactor program does exclude a majority of farms that do not have the money to participate. By charging so much, it does exclude them. So, it does violate the rules of a non profit exemption. This is now okay, because all that money has been diverted to the ALC.
The ALC CAN pay its BOD for its services since it is a for profit company. The ALC does not have to report to the AOBA BOD. This means that the membership does not have a vote on any decisions made by ALC.
Does everyone understand this? You have no rights to challenge where the money goes. You have no right to challenge how much ALC charges for its services. Because it is a for profit company, YOUR RIGHTS AS MEMBERS OF AOBA DO NOT APPLY.
Unbelieveable. I suggest everyone log on to the AOBA website and look at the legal pages and read them.
Please consider that while everyone likes to trust what their BOD is doing, there are things like ENRON that come up from time to time. Keep yourself educated. You can't trust that your best interests are being considered. You must be informed.
Respectfully,
Stephanie
Stardust Alpacas
Creswell, OR
541.895.0964
stardustalpacas@
Acres of Love <alpacas@acresoflove
AOBA is not a charitable organization. We're not benefactors, so don't know
how those folks account their participation for tax purposes. However, AOBA
membership dues,.show entries and expenses, show sponsorships, affiliate
memberships.
such.
The benefits provided to benefactors are not reserved "to just some special
people". Any AOBA Farm Member can be a benefactor.
The ALC has no Board of Directors. Since ALC has no BOD, there is no one to
receive a salary. ALC is a wholly owned subsidiary corporation controlled
by the AOBA BOD. The AOBA BOD cannot be salaried.
Jess
Jess & Cookie Bowers
Acres of Love Alpaca Ranch
Acres of Love Alpaca Transport
11006 N 92nd East Ave
Owasso, OK 74055-6531
(918) 327-3519
Fax (918) 272-0969
WWW.Acresoflove.
----- Original Message -----
From: "Stardust Alpacas" <stardustalpacas@
To: <alpacapolitics@
Sent: Tuesday, January 01, 2008 9:05 PM
Subject: Re: [alpacapolitics] Re: [AlpacaTalk] UBIT taxes and non profit
status-from the IRS website
> Libby,
>
> No one is coaching me. I can smell and see a rat all by myself, thanks.
> The IRS website is very clear and concise. You might try looking there
> too...
>
> If the Benefactor program is set up as a charitable donation then you
> cannot write it off as a business expense because it isn't. It is charity.
> Look it up. I am sure you wouldn't be giving it just for charity as you
> stated below that ALL of your money goes to marketing and farm expenses.
> You just told us you don't have money for charity.
>
> I don't care what the Benefactors are doing for the membership. By
> offering special benefits to just some special people is in direct
> conflict of the first rule of a non profit status. I notice that the
> current AOBA by-laws removed this text. That is okay. The IRS set up that
> law, not AOBA.
>
> Libby, I will explain this again. It doesn't matter what amendments there
> are to the UBIT laws. They were set up in 1950. Nothing new. It states on
> the IRS site that any gross profit over $1000 in unrelated business has to
> pay tax on that profit. Crystal clear.
>
> So , in case no one got that... ALC can (and probably will) pay its board
> now. It can funnel AOBA funds (your contributions) to ALC and you can't do
> anything about it. ALC BOD does not have to report to the AOBA BOD.
>
> Good job, Libby. Glad you back this so forcefully!
>
>
> Stephanie
>
>
> libby@alpacafarm.
>
> Stephanie,
>
> 1. Actually, Stephanie, many of us don't think you do understand what a
> benefactor is and how the programs work for the benefit of the membership.
> That's why people keep trying to be helpful. I suspect we will all give
> up
> trying to help soon.
>
> 2. Yes, Amy and I do look alike.......
>
> 3. Yes, you are speaking out of turn but I suspect that won't stop you
> nor concern you. I cannot speak for Jerry but I have an MBA and I too
> would have listened to not-for-profit accountants working in the not for
> profit field in the State of Colorado if their opinion was that AOBA
> didn't
> have to pay taxes on specific income. Accountants and lawyers specialize
> in different areas and things (laws, rules, regulations) differ from state
> to state, from profit to not for profit. Since 1950? No amendments
> since
> then, not one? Okay, I'll take your word for it. So....since 1950, no
> AOBA Board ever figured it out until NOW that that income was taxable. Not
> one Board nor one accountant. Well I say....good work current Board!! I
> guess it did take Jerry, the current accountant and the current Board to
> figure it out, eh...even with everything else they have to do! (To my
> knowledge, AOBA has never failed an IRS audit nor has an accountant to my
> knowledge, told the Board before that this income was taxable but I
> believe
> Amy already addressed this several times so listen to her, not me.
> However, that's a lot of Boards, a lot of Board members, a lot of audits,
> a
> lot of accountants and a lot of years when this went unnoticed. This
> accountant evidently did give his opinion that the income and the Board
> has
> listened. They LISTENED....
> I
> don't think we can ask for any more out of a bunch of volunteers whose
> ranks turn over year after year.
>
> However, guess we should take them out behind the shed and whip them!
> That
> would teach them to fix something that needed to be fixed!
>
> 4. Yes, costs do increase. As the national herd grows and there are more
> members, more money is needed to maintain the same level of demand for
> alpacas through marketing. Yep, money doesn't grow on trees and more is
> needed. PBS probably has the same problems...
>
> 5. Stephanie...
> with you that this income doesn't belong in the non-profit. That's why
> they are setting up the FOR PROFIT subsidiary for that income. Heather,
> if
> this income is in a FOR PROFIT subsidiary, then it is NO LONGER in the NOT
> FOR PROFIT. Therefore, there is no conflict. This will solve the
> problem!
> The problem would be if it remained in the not for profit! The Board
> could
> stop the FRG, Auction etc. progarms but AOBA desperately needs those
> income
> streams. That is why the Board is moving those programs to a FOR profit
> subsidiary. You are right...it doesn't belong in a not for profit. It
> belongs in a FOR profit and that is where the Board wants to move the
> programs for accounting purposes. They are FIXING the problem so there is
> no conflict and no problem. Don't know how else to explain it and this is
> my last effort to do so as I am beginning to suspect that you already know
> the answers.
>
> 6. Wow. A $5,000 sponsorship to television! You are actually telling me
> that you give $5,000 to PBS ...well, you must be rich...at least by
> Heather's definition!! That's an incredible amount to donate to
> television.
> How generous of you. (Actually, I am serious...that IS very generous.)
> Wish I could afford to do that. Every penny we have goes to marketing to
> sell alpacas or for running the farm, money needed to pay the staff we
> have
> so that they can feed their 26 families and pay for the care and feeding
> and medical care, etc. etc. for all our alpacas. The expenses for the
> farm
> eat up all the revenue we make. You lucky dog. $5,000 to PBS! Oh, guess
> PBS is the lucky dog too!
>
> 7. Stephanie, you need to explain to the person coaching you that if you
> write a check for $5,000 to AOBA for the benefactor program, you can
> write
> it off 100% as an expense because you wrote a check and spent the money.
> It doesn't matter whether it's written to AOBA or someone else. An
> business expense is an business expense as far as Uncle Sam is concerned.
> All you need to include the benefactor expense in your taxes is the
> cancelled check (or some proof) to prove to Uncle Sam that you paid it if
> you are audited and that the expense was appropriate for your business.
> Same as paying for animal feed or anything else. It's a business expense.
>
> The amount of taxes you pay depends on your income tax bracket when all is
> said and done...the more money you make, the more taxes you pay (higher
> percentage and higher taxes.) You might be at a 50% tax bracket...others
> may be at 15%. One way or the other, Uncle Sam gets his money.
>
> That's all I have to contribute for now. I've tried my best. Happy New
> Year.
>
> Take care,
>
> Libby
>
> Libby Forstner
> Magical Farms
>
> Stardust Alpacas
> <stardustalpacas@
> yahoo.com> To
> Sent by: alpacapolitics@
> alpacapolitics@
> hoogroups.com
> Subject
> Re: [alpacapolitics] Re:
> 01/01/2008 07:58 [AlpacaTalk] UBIT taxes and non
> PM profit status-from the IRS website
>
>
> Please respond to
> alpacapolitics@
> hoogroups.com
>
>
>
> I am addressing everyone who replied on this topic.
>
> 1. Thanks Connie. I know what a benefactor is. None of you explanations
> were new news to me!
>
> 2. Libby, I confused you with Amy. She said that AOBA is now having to pay
> higher taxes than before. I believe it was on a post from 12/29 on
> AlpacaPolitics.
>
> 3. Guess what guys! UBIT taxes have been around since 1950. This is not
> brand new. Libby, maybe I am speaking out of turn, but your husband has a
> law AND finance degree and has been Treasurer of AOBA for many years. I
> would think that he would have a clue about what needs to be paid without
> waiting for an audit. Besides, all you have to do is Google "non profit
> IRS" and it will take you to the page on the IRS website that tells how a
> non profit is supposed to work. It refers to UBIT tax plain as day and
> gives links to nearly everything else related to non profits.
>
> 4. The magazine and mailing lists used to be much more affordable to your
> average member. AOBA changed the rules stariting 2006 and decided to make
> people pay a premium for these benefits that should be available to all
> since this is supposed to be a marketing organization. By establishing the
> Benefactor status, AOBA is now benefiting certain members of the group
> over
> others, which is a violation of the requirements of a non-profit. It is in
> violation because only certain members have access to information that
> other members do not. If there are a few more Benefactors that are not
> board members or judges, I am sorry to have excluded you. Still, the
> majority is made up of the above. So, numbers 1&2 of what constitutes a no
> profit are not being adhered to.
>
> Lets use Public Television as an example. I donate $5000 to PBS and I am
> now a Benefactor. I get my name on the screen and am praised for being a
> business partner and PBS tells the world how great I am. What it does not
> do is give me a mailing list of every PBS member so I can mail or email
> advertising to them.
> It's slightly different than what AOBA does.
>
> Does AOBA allow members to opt out of the spam?
>
> 5.QUID PRO QUO. Since everyone here seems to think that they are donating
> to AOBA as a benefactor (you are paying for a service of getting a mailing
> list) or to purchase a female at the AOBA auction, here is some info you
> might want to know. When you donate, say, $5000 (and everything over
> $250),
> AOBA needs to provide you with statement of donation to file with your tax
> returns. Also, for that Benefactor status, AOBA must provide to you the
> ACTUAL value of the benefit. You are ONLY allowed to write off the actual
> amount of the benefit received--not the whole $5000, since we know the
> benefit is not really worth $5000 in cash.
>
> It seems that people really need to start doing some research. Also, AOBA
> really needs to get some tax people that know what they are doing.
>
> 6. What about the $1million + worth of CD's in the bank?
>
> 7. Why did AOBA pay $34k as of June 2007 (only 6 mos commission) to
> someone
> for commission for advertising sales in Alpacas Magazine? Is there a lot
> of
> cold calling? Seems that most AOBA members that advertise don't need to be
> sold on it. Neither do the regular vendors that advertise. Also, I am sure
> that they would like to have reduced rates instead of paying someone
> commission or get some of that money back.
>
> 8. Does setting up the Alpaca Livestock Company allow the BOARD MEMBERS to
> get paid for their services from now on? I realize that AOBA BOD would
> still be volunteer without pay since it is now separate.
>
> Lots of questions!
>
> Stephanie
>
> libby@alpacafarm.
>
> Hello Stephanie,
>
> 1. I don't recall saying that AOBA paid taxes all along. Please don't put
> words in my mouth.
>
> 2. If the accountants said that AOBA didn't have to pay taxes in the past
> (all 15 to 20 years), then that is probably who the Board, acting in good
> faith listened to as they should have done. This didn't just happen with
> this Board...it was this Board's accountant who figured it out! Every
> Board since AOBA was incorporated under the premise that the income wasn't
> taxable. It sounds to me like the interpretation of the rules by the new
> accountant is different than the old accountant.
>
> 3. Who says that all benefactors are large breeders? All current and past
> Board members and Judges are rich? That's news to me. The marketing
> committee (made up of mostly small breeders over the years) had the
> responsibility to raise money for marketing. Marketing dollars are spent
> for the benefit of all members. The funds raised pays for the national
> marketing program which helps all farms sell their alpacas. These
> volunteers recommended setting up levels of sponsorship to try to capture
> more income from fewer people so that most members don't have to pay as
> much (such as you). If these people don't give more, then you will have to
> give a lot more.
>
> 4. It is because of this non-for-profit law that Board members can't be
> paid a salary.
>
> 5. The new subsidiary makes it possible for AOBA to still do the program
> (for profit) and save the members taxes. The concept is, Stephanie, that
> the for profit CAN do these things but we have to pay taxes on the income
> now, that's all.
>
> 6. Stephanie, under your scenario, a for profit CAN DO the benefactor
> program. I do not see where any laws are broken nor do I see any conflict
> of interest. Lawyers and accountants are reviewing and working with the
> Board on this. It's still under the control of the duly-elected Board.
>
> Libby
>
> Libby Forstner
> Magical Farms
>
> The marketing committee (by the way, mostly small breeders) had to figure
> out a way to raise money for member marketing. They decided to offer
> benefactor program. I wasn't aware that all benefactors were big breeders.
>
> Stardust Alpacas
> <stardustalpacas@
> yahoo.com> To
> Sent by: alpacapolitics@
> AlpacaTalk@yahoog alpacatalk@yahoogro
> roups.com cc
>
> Subject
> 01/01/2008 04:31 [AlpacaTalk] UBIT taxes and non
> PM profit status-from the IRS website
>
> Please respond to
> AlpacaTalk@yahoog
> roups.com
>
> I have been reading up on the IRS website about non profits and UBIT
> taxes.
> Here is what I learned. I am sure that there are holes since this is not
> the complete tax law, so please consider that before you ridicule me for
> leaving something out!
>
> There are 2 requirements to be listed as a non profit.
> 1. That no one person or select few people can directly benefit from the
> organization (more than the group as a whole).
> 2.The objects of the organization must be the betterment of conditions of
> those engaged in the pursuits of labor, agriculture, and horticulture, the
> improvement of the grade of their products, and the development of a
> higher
> degree of efficiency in their respective occupations.
>
> So, because AOBA is a non-profit, they are tax exempt. However, when you
> gross over $1000 a year in unrelated business income tax (UBIT 501(c)(3),
> you will have to pay tax on all that income. UBIT was established in 1950,
> so AOBA should have been paying this all along since it is not a new tax
> requirement and is listed right there on the non profit IRS page. UBIT tax
> returns as well as non profit (990 form) are PUBLIC RECORD for all to
> view.
>
> Unrelated Business Income Tax
>
> For most organizations, an activity is an unrelated (and subject to
> unrelated business income tax) if it meets three requirements:
>
> 1. It is a trade or business.
> 2. It is regularly carried on.
> 3. It is not substantially related to furthering the exempt purpose of the
> organization.
>
> 1.Libby said that AOBA paid taxes all along, so if this UBIT tax is new to
> AOBA, what taxes have been paid?
>
> 2. Also, an even better question is since all you need is to file the UBIT
> forms for all gross income over $1000, WHY was there a need to start a new
> for profit company?
>
> 3. If a non profit is NOT to benefit specific members of the organization,
> why does AOBA have the BENEFACTOR designation set up to cater to large
> breeders who can afford the prices such as AOBA BOARD MEMBERS and AOBA
> JUDGES? Isn't this not only a conflict of interest but it is in violation
> of the rules of a non profit organization.
>
> Anyone have answers to these questions?
>
> Stephanie
> Stardust Alpacas
> Creswell, OR
>
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