Re: [AlpacaTalk] UBIT taxes and non profit status-from the IRS website
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@
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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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posted by Chaddo at 2:43 PM
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