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the Poetry Circus. The event was assisted by "umbrella" tax-exempt status via Salon Productions and the Allied Arts Foundation. (photo by Joseph Fitzgerald) |
"It's easy to incorporate as a non-profit with the state, but getting 501(c)(3) status is hard, even burdensome," says Katherine Hendricks, an attorney specializing in arts issues. Applications take many hours to prepare, and even if you keep scrupulous records, fine-tune your statement of purpose, and prepare good descriptions of your programs, legal fees can add up to several thousand dollars. There's some free advice available, such as from volunteer legal clinics, but the process is still very time consuming. The filing fee alone costs $150, or a more realistic $465 for organizations expecting to gross $10,000 a year four years. Hendricks mentions the importance of filling in the forms thoroughly, without taking shortcuts. Better yet, small and beginning organizations should find an umbrella, a 501(c)(3) organization to act as a sponsor.
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the Poetry Circus. The event was assisted by "umbrella" tax-exempt status via Salon Productions and the Allied Arts Foundation. (photo by Joseph Fitzgerald) |
"We occasionally agree to sponsor someone," says Jerry Thonn, president of the Allied Arts Foundation (AAF). Established in 1968, AAF has provided an umbrella for about five to ten organizations a year since the late 1970s. A good example of someone they would sponsor is a dance company receiving a grant contingent upon tax-exempt status for a performance. Generally they take a 10% fee for their service (in some cases the granting organization forbids the sponsor from taking a cut). These payments make up a small percentage of the $100,000 annual AAF budget, which mostly comes from direct contributions and an endowment fund. "My personal view is it would be wrong to be a kind of perpetual sponsor," he says, citing a preference for lending the AAF umbrella to small, innovative arts projects that can be completed within a year.
Rather than strand small arts organizations that orient themselves to long-term projects, AAF does renew its sponsorship for some. Synapse magazine needs about $1000 to produce each of its quarterly issues. Under the AAF umbrella since they started four years ago, they not only can receive direct tax-deductible donations, but also can sell space with the enticement that advertisers can write off the cost of their ads. Of course, Synapse collective member Sandra Faucett points out, many would advertise without this perk. A clearer advantage of being a tax-exempt non-profit is that they qualify for grants, which now pay about a third of their bills.
Faucett also mentions the advantage of legitimacy a tax-exempt organization enjoys when asking for donations- an advantage amplified by Cat O'Sullivan, president of Salon Productions. "That's why there's corporate giving in this country," O'Sullivan says, referring to the tendency profit corporations have to donate only to non-profits with the legitimacy of 501(c)(3) status. Although Salon mostly stages weekly poetry readings, they also mount more ambitious projects. The recent three-day Poetry Circus managed to cover its costs by having the tax-exempt sponsorship of Salon, who is sponsored by Allied Arts Foundation. "Typically, no one gets [tax-exemption] until they're three years running," says O'Sullivan. "The feds won't give it to you. You have to prove you're competent."
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The feds won't give it to you. You have to prove you're competent. |
While Padeway suggests consulting with the development officer of an organization like your own to find how best to get that status, some arts organizations want no part of it. Marion Kimes says Red Sky Poetry Theater applied for tax exemption years ago, but after their application was apparently lost they decided it wasn't worth the trouble. Pam Heath, business manager of Point No Point magazine says they don't seek tax exemption "for pointless reasons, like everything we do." Although they may eventually decide to go for it, she says bookkeeping is much easier in the profit world. The energy other organizations put into writing grants and maintaining tax-exempt status Point No Point can put into selling ads and subscriptions.
Besides, after all the effort and expense to qualify, you may be denied. Recently the street paper Real Change was refused 501(c)(3) status on the grounds that they are too political and too commercial. "The commercial argument was the strongest one," says director Tim Harris, adding, "since that ruling we've been more political than ever. Also, it's attractive to us not to have to worry over political content." They are creating the non-profit Real Change Homeless Empowerment Project to support the Street Life Art Gallery, Homeless News Service, Homeless Speakers Bureau, and StreetWrites writing workshop, while the newspaper becomes a for-profit corporation. Then they will reapply for tax-exempt status for the Empowerment Project.
Meanwhile in the profit sector, it's practically stupid for a company to give away money that doesn't result in a tax deduction. "We have a long tradition of citizenship at Boeing. There are some tax advantages, but that is not the driver behind this," says Boeing spokesperson Sherry Nebel. "You want a vital quality of life," for the community and for the Boeing employees, in Seattle and elsewhere. Last year Boeing donated $60 million nationwide, 23% of which went to the arts and all of which went to organizations with tax exempt status. As she says, "Boeing is not in the business of determining who is a 501(c)(3) and who is not."
Washington Lawyers for the Arts still conducts clinics twice a month, where $15 gets you about thirty minutes of advice. Call (206) 233-7987, or contact Artists Trust (206) 467-8734.
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