View source for Form 1023 Draft

{{Floating TOC}}Below is the proposed draft of the HacDC IRS [http://ftp.irs.gov/charities/article/0,,id=130101,00.html Form 1023].  This is the form we need to fill out to become a 501(c)(3) status.

This wiki article will document proposed answers to the form, following on a Part and Line Item basis.  You can follow along using [http://www.irs.gov/pub/irs-pdf/f1023.pdf the complete 1023 form], or check out the [http://www.irs.gov/pub/irs-pdf/i1023.pdf 1023 form instructions].

== Issues of note ==
* We should complete our Bylaws amendments before submitting this application.  (See Part II, Line 5)
* We should make sure all our DC filings are complete and correct (i.e. registered agent, registered office) before submitting.
* We should prepare an Annual Report, as per our bylaws, describing the activities of HacDC and giving our financial picture from our Tax Year ended December 31, 2008.  (See [[Form_1023_Draft#Part_IV:_Narrative_Description_of_Your_Activities | Part IV]])
* Even though we have no paid staff or contractors, it may be a good idea to adopt compensation policies as described  (See [[Form_1023_Draft#Part_V_:_Compensation_and_Other_Financial_Arrangements_With_Your_Officers.2C_Directors.2C_Trustees.2C_Employees.2C_and_Independent_Contractors | Part V]])
* We should determine whether or not we will retain rights to intellectual property or other discoveries.  (See Part VIII, Question 10)
* We should determine whether or not HacDC will make grants or distributions.  (See Part VIII, Question 13)

== Sections to note ==

The "difficult" sections will be noted here.  These are the ones that require real thought as opposed to simple plugging away of information

* [[Form_1023_Draft#Part_IV:_Narrative_Description_of_Your_Activities | Part IV]]

== Part I : Identification of Applicant ==

# Full name of organization (exactly as it appears in your organizing document): '''HacDC'''
# c/o Name (if applicable): (Not Applicable)
# Mailing address: '''1525 Newton St NW, Washington DC 20010''' ''Note, there is no room or suite for HacDC''
# Employer Identification Number (EIN): '''(Tim Collins should have this number)'''
# Month the annual accounting period ends: '''12''' ''We follow a calendar accounting year''
# Primary contact: ''Contact information for Elliot or Tim, whoever wants to be the primary.''
# Are you represented...: '''No''' ''This line is if attorneys or CPAs are filling the application and we want the IRS to communicate with them directly.''
# Was a person who is not one of your officers...: '''No''' ''Presumably, nobody is getting paid to help us fill out this application''
# Organization’s website, e-mail: '''http://hacdc.org info@hacdc.org'''
# Certain organizations are not required to file: '''No''' ''We will be required to fill out an 990''
# Date incorporated if a corporation...: '''03/25/08''' ''Wow, we missed our anniversary party.  This was the date we were officially incorporated in the District of Columbia.  You can see our registration information [http://mblr.dc.gov/corp/lookup/status.asp?id=53073 here]''
# Were you formed under the laws of a foreign country?: '''No'''

== Part II : Organizational Structure ==

We are a Not for Profit corporation organized in the District of Columbia, organized specifically to become a 501(c)(3).

# Are you a corporation?: '''Yes''' ''Tim should have our original articles of incorporation''
# Are you a limited liability company: '''No'''
# Are you an unincorporated association?: '''No'''
# Are you a trust?: '''No'''
# Have you adopted bylaws?: '''Yes''' ''Note:  We should complete all proposed bylaws amendments before submitting this application.''

== Part III : Required Provisions in Your Organizing Document ==

We have all the required language in our [[Articles of Incorporation]]

# Section 501(c)(3) requires that your organizing document state your exempt purpose(s)...: '''Yes  [[Articles_of_Incorporation#4Third Article | Third Article]]'''
# Section 501(c)(3) requires that upon dissolution of your organization, your remaining assets...: '''Yes [[Articles_of_Incorporation##Sixth_Article_:_Management.2C_Affairs_and_Activities_and_Provision_for_Dissolution | Sixth Article]]'''

== Part IV: Narrative Description of Your Activities ==

This is the part of the application that will require the most discussion among our members.  We may choose to attach our Annual Report, which we should prepare before submitting the application.  In addition to a narrative of projects we're working on and the general nature of the space, what we're doing and what we plan to do, the Annual Report should be professional looking and serve as an attractive promotional device for HacDC.  [http://www.carnegie.org/pdf/CCNY-AR08-18.pdf Here's a good example] of an Annual Report from the Carnegie Foundation

=== Instructions from the application ===

Using an attachment, describe your '''past, present, and planned activities in a narrative'''. If you believe that you have already provided some of this information in response to other parts of this application, you may summarize that information here and refer to the specific parts of the application for supporting details. You may also attach representative copies of newsletters, brochures, or similar documents for supporting details to this narrative. '''Remember that if this application is approved, it will be open for public inspection.''' Therefore, your narrative description of activities should be thorough and accurate. Refer to the instructions for information that must be included in your description.

=== Instructions from the form instructions ===

For each past, present, or planned activity, include information that answers the following questions:
* What is the activity?
* Who conducts the activity?
* When is the activity conducted?
* Where is the activity conducted?
* How does the activity further your exempt purposes?
* What percentage of your total time is dedicated to the activity?
* How is the activity funded?
* List any alternate names under which you operate

If you have a website, you may attach a paper copy of to support your narrative description of activities

=== Sample Activity: Microcontroller Mondays ===
Note: This is by no means complete, this is just to give an example of a good description of the activity.  The same information may be presented in a less structured/more narrative form, as long as the questions are answered.

* Microcontroller Mondays is a weekly gathering of those interested in the pursuit of microcontroller-driven devices, their designa nd theory.  The event is open to the public, designed for all skill levels and serves as one of the organization's primary "entry points" for involvement.
* The activity is conducted by volunteer members of HacDC
* The activity is conducted most Monday nights 
* The activity is conducted at HacDC's laboratory space
* The activity furthers the following exempt purposes
** Charitable: The activity is free and open to the public.  HacDC's equipment, meeting space and some consumables are made available to all participants.  Other non-profit organizations and those pursuing charitable activities use the weekly meetup to learn more about microcontrollers and other electronic technology as well as network with those who have expertise and are willing to apply that expertise to relevant charitable work.
** Educational: The activity's primary aim is information exchange and mentorship on the science of microcontroller design and theory.  Experts and those well-versed in the technology share information with each other and mentor those with little to no experience with the technology.  Often, a potential hobbyist will bring a project they cannot complete to the event to seek advice and mentorship in completing the project and learning techniques and theory to complete more advanced projects or design new ones.
** Scientific: The activity's secondary aim is to engage with microcontroller and related technology, discover new applications of the technology and test the limits and potentials of existing technology and theory in the field.
* Approximately 15% of our total volunteer and member hours are dedicated to this activity
* The meeting space and utilities for the space are funded by members, the equipment is primarily donated or paid through membership dues and donations. Those participating in mentorship and research activities do so as volunteers.

== Part V : Compensation and Other Financial Arrangements With Your Officers, Directors, Trustees, Employees, and Independent Contractors ==

HacDC has no paid staff, officers, volunteers, etc.  As such, this clause should present no issue to us, though we may want to adopt policies stating under what circumstances someone would be compensated (i.e. a teacher of a class, speaker, etc.)

This clause was expanded in the most recent revision of the application to ferret out organizations formed primarily for the enrichment of the participants.  It's common for hobbyists in the field to form their own non-profit to fund their presumably exempt activities as a primary career.

'''However, the officers will have to attach a list "showing their name, qualifications, average hours worked, and duties."'''

Note: The officer titles are most likely going to change pending a Bylaws revision.

: 1a.
: Elliot Williams / Coordinator in Chief / 1525 Newton St NW, Washington DC, 20010 / -$0-
: (Other officers, etc.)

: 1b. '''None'''
: 1c. '''None'''

: 2a. Are any of your officers, directors, or trustees related to each other through family or business relationships? If “Yes,” identify the individuals and explain the relationship. '''No'''
: 2b. Do you have a business relationship with any of your officers, directors, or trustees other than through their position as an officer, director, or trustee? If “Yes,” identify the individuals and describe the business relationship with each of your officers, directors, or trustees. '''No'''
: 2c. Are any of your officers, directors, or trustees related to your highest compensated employees or highest compensated independent contractors listed on lines 1b or 1c through family or business relationships? If “Yes,” identify the individuals and explain the relationship. '''No'''
: 3a. For each of your officers, directors, trustees, highest compensated employees, and highest compensated independent contractors listed on lines 1a, 1b, or 1c, attach a list showing their name, qualifications, average hours worked, and duties.  '''Attached list of qualifications, etc.''' ''This is where the officers will have to list their duties, qualifications, etc.''
: 3b. Do any of your officers, directors, trustees, highest compensated employees, and highest compensated independent contractors listed on lines 1a, 1b, or 1c receive compensation from any other organizations, whether tax exempt or taxable, that are related to you through common control? '''No''' ''This assumes that none of the officers work or have business or other outside interests with the same entities.''
: 4. In establishing the compensation for your officers, directors, trustees, highest compensated employees, and highest compensated independent contractors listed on lines 1a, 1b, and 1c, the following practices are recommended, although they are not required to obtain exemption. Answer “Yes” to all the practices you use. 

''The curious part about these policies is that, since nobody is compensated, they're technically not necessary.  We can either put in place these policies on the hypothetical saying we'll eventually pay people or we could say they're irrelevant because nobody here is compensated''

: 4a. Do you or will the individuals that approve compensation arrangements follow a conflict of interest policy? '''Yes'''
: 4b. Do you or will you approve compensation arrangements in advance of paying compensation? '''Yes'''
: 4c. Do you or will you document in writing the date and terms of approved compensation arrangements? '''Yes'''
: 4d Do you or will you record in writing the decision made by each individual who decided or voted on compensation arrangements? '''Yes'''
: 4e Do you or will you approve compensation arrangements based on information about compensation paid by similarly situated taxable or tax-exempt organizations for similar services, current compensation surveys compiled by independent firms, or actual written offers from similarly situated organizations? Refer to the instructions for Part V, lines 1a, 1b, and 1c, for information on what to include as compensation. '''Yes'''
: 4f Do you or will you record in writing both the information on which you relied to base your decision and its source? '''Yes'''


== Part VI: Your Members and Other Individuals and Organizations That Receive Benefits From You ==

This is a very sticky part of the application.  What HacDC does and how it relates to other organizations will need to be documented in narrative form in this part of the application.

What we've done and what we plan to do should be noted in this section and what avenues we choose to open or close for ourselves will need to be decided before we can fill this out.  We should distinguish between ongoing activities (past/present) and what we plan to do ("planned activities").  We should structure our responses in terms of "programs", even though in practice, we don't make specific programmatic distinctions as such.

The IRS basically wants to make sure that the exempt services and related "benefits" we provide here are not for any particular group of individuals or are otherwise self-serving.  HacDC is basically in the clear on this, but it is important to clearly document this as such.  

: 1a. In carrying out your exempt purposes, do you provide goods, services, or funds to individuals? '''Yes.  Our core program is providing a space for the creative exploration of technology.  Members and other individuals use the space and incidental services provided.  Our educational program, through more formalized classes, provide individuals with introductory knowledge in electronics, open source software and other technical pursuits.  We also plan on providing services to the community, such as public wireless internet access.  Informally, we serve as a hub for donated equipment which individuals may avail themselves of for their own benefit.  However, we do not as a rule provide individualized goods or services to individuals.  While we anticipate funding specific projects or pursuits, we do not provide funds to individuals.'''

: 1b. In carrying out your exempt purposes, do you provide goods, services, or funds to organizations? '''Yes.  We currently provide a forum for other organizations to have meetings or host workshops.  We are also working with our landlord to provide internet access to other organizations that rent space in our building.'''

: 2. Do any of your programs limit the provision of goods, services, or funds to a specific individual or group of specific individuals? '''No'''  ''Note, we should draft some kind of non-discrimination policy along these lines.''

: 3. Do any individuals who receive goods, services, or funds through your programs have a family or business relationship with any officer, director, trustee, or with any of your highest compensated employees or highest compensated independent contractors listed in Part V, lines 1a, 1b, and 1c? '''No'''

== Part VII: Your History ==

These are relatively simple and straightforward.

: 1. Are you a successor to another organization? '''No''' ''HacDC did not take on another organization's assets or mission, it was formed entirely independently.''

: 2. Are you submitting this application more than 27 months after the end of the month in which you were legally formed? '''NO''' ''As long as we complete this application by May of 2010, we're OK.''

== Part VIII: Your Specific Activities ==

These are relatively straightforward questions that shouldn't pose too much difficulty.  In answering specifically, we should attempt to keep our options open while bearing in mind that HacDC should not contact with outside organizations to accomplish any fund raising or other program goals, nor should it serve other groups as such.

One potential issue is raised regarding intellectual property in Question 10.

: 1. Do you support or oppose candidates in political campaigns in any way? '''No''' ''501(c)(3)s are not allowed to specifically advocate or influence legislators or pending legislation, while they may, in a general way, provide information about political issues.  Short of retaining counsel to guide such activities, it's best if HacDC itself remains politically neutral as an organization.''

: 2a. Do you attempt to influence legislation? '''No''' 
: 2b. (N/A)

: 3a. Do you or will you operate bingo or gaming activities? '''No''' ''We'd have to get really desperate to resort to Bingo, but it is a legitimate question for churches, native american groups, etc.''
: 3b./3c. (N/A)

: 4a. Do you or will you undertake fundraising? '''Yes.  Email solicitations, Personal Solicitations, Foundation Grant Solicitations, Accept Donations on Your Website, Receive Donations from Another Organization’s Website, Government Grant Solicitations'''
: Attach a description of each fundraising program:
: '''* General Fundraising:  We have pursued general fundraising to support the efforts of HacDC.  Such fundraising has taken place through our website, at events in our space, external events we participate in and through various channels by our members' individual initiative.''' 
: '''* Equipment Donations:  Most of HacDC's equipment is donated and we plan on pursuing other equipment donations'''
: '''* Specific Fundraising:  Members have expressed interested and plan on targeting fundraising efforts towards the acquisition of larger pieces of equipment or capital intensive projects.'''

: 4b. Do you or will you have written or oral contracts with any individuals or organizations to raise funds for you? '''No'''
: 4c. Do you or will you engage in fundraising activities for other organizations? '''No'''
: 4d. List all states and local jurisdictions in which you conduct fundraising. 
: '''* Washington, District of Columbia: Fundraising for HacDC conducted by HacDC'''
: '''* Maryland: Fundraising for HacDC conducted by HacDC'''
: '''* Virginia: Fundraising for HacDC conducted by HacDC'''
: '''* Ohio: Fundraising for HacDC conducted by HacDC'''
: '''* Globally, Via the Internet: Fundraising for HacDC conducted by HacDC'''

: 4e. Do you or will you maintain separate accounts for any contributor under which the contributor has the right to advise on the use or distribution of funds? '''No''' ''HacDC should not maintain what are called "Donor Advised Funds".  While people may donate to a specific cause, i.e. a "Laser Cutter Fund" or other restricted fund, the IRS is asking about funds where donors have the right to specify where funds go after the donation is made.

: 5. Are you affiliated with a governmental unit? '''No''' ''HacDC was not created or controlled by a government agency.''

: 6. Do you or will you engage in economic development? '''No''' ''This is specifically asking if HacDC will take part in activities like a Business Improvement District, entities which are somewhat complicated and well outside the scope of what HacDC does.''

: 7a. Do or will persons other than your employees or volunteers develop your facilities? '''No''' ''This is asking about the development of real property.  HacDC does not own real property, nor does it have any concrete plans to do so at this time.''
: 7b. Do or will persons other than your employees or volunteers manage your activities or facilities? '''No'''
: 7c. ''We should not have any relationships which need to be documented in this section''

: 8. Do you or will you enter into joint ventures, including partnerships or limited liability companies treated as partnerships, in which you share profits and losses with partners other than section 501(c)(3) organizations? '''No''' ''While obtaining something like the laser cutter might be advisable under this scenario, it's advisable to avoid such relationships.  If this status changes, we merely need to inform the IRS as such as part of our regular 990 filing process.''

: 9a. Are you applying for exemption as a childcare organization under section 501(k)? '''No'''  ''We're not in any way qualified to nor would we gain much by applying under this section''

: 10. Do you or will you publish, own, or have rights in music, literature, tapes, artworks, choreography, scientific discoveries, or other intellectual property? '''No'''  ''HacDC should not be in the business of owning intellectual property or managing property rights, especially as the space we operate in is one of open source style collaboration.  We should also eschew this so our members and others are free to pursue their own discoveries within our space and determine, on an individual basis, how those discoveries are licensed.''

: 11. Do you or will you accept contributions of: real property; conservation easements; closely held securities; intellectual property such as patents, trademarks, and copyrights; works of music or art; licenses; royalties; automobiles, boats, planes, or other vehicles; or collectibles of any type? '''Yes'''.  ''We should explain here that we would accept certain pieces of equipment or real property that have a specific application to our exempt purposes, i.e. a building for our activities, a vehicle for equipment moving, etc.  The IRS is trying to determine whether or not we'll be engaging in vehicle donation programs or the like where such items are donated, then turned around and sold for cash by the organization.''

: 12. Do you or will you operate in a foreign country or countries? '''No''' ''As an organization, HacDC itself should not operate in foreign countries, though it may support other relief efforts.''

: 13a. Do you or will you make grants, loans, or other distributions to organization(s)? '''No'''  ''This is a potentially sticky issue.  It's probably best for HacDC to stay out of the grant making business, at least for now, until HacDC can properly craft a role or mission for doing so.  For now, it's best that HacDC projects remain in house.''

: 14a. Do you or will you make grants, loans, or other distributions to foreign organizations? '''No''' ''Post 9/11, this is an incredibly thorny issue which HacDC should avoid at all costs.''

: 15. Do you have a close connection with any organizations? '''No'''.  ''HacDC's officers and members are not, as a whole, closely connected to another organization.  The closest connection we might have is to our landlord, St. Stephen's, but they do not exercise control over HacDC as an organization nor does HacDC exercise control over it."

: 16. Are you applying for exemption as a cooperative hospital service organization under section. '''No'''

: 17. Are you applying for exemption as a cooperative service organization of operating educational organizations under section 501(f)? '''No'''

: 18. Are you applying for exemption as a charitable risk pool under section 501(n)?  '''No'''

: 19. Do you or will you operate a school? '''No'''  ''While we offer classes, we do not have formal instruction, a regular faculty, or a regularly enrolled body of pupils.''

: 20. Is your main function to provide hospital or medical care? If “Yes,” complete Schedule C. '''No'''

: 21. Do you or will you provide low-income housing or housing for the elderly or handicapped?  '''No'''

: 22. Do you or will you provide scholarships, fellowships, educational loans, or other educational grants to individuals, including grants for travel, study, or other similar purposes?  '''No'''

== Part IX : Financial Data ==

This information is fairly straightforward.  Using the UCOA, the applicable statements for the financial year ended December 31, 2008 and the tax year to this point should be easily prepared when the application is ready.

The balance sheet is for the tax year ended December 31.  This will have substantially changed as of the time of filing, and the statement at the time of filing.  

== Part X: Public Charity Status ==

HacDC is a Public Charity by virtue of the fact that it receives "broad public support" from many different sources in the public.  A Private Foundation is one that is primarily funded by a few individuals, trusts, corporations, etc.  The questions below are designed to clarify HacDC's status as a Public Charity.

: 1. Are you a private foundation? '''No'''

: ...

: 5. If you answered “No” to line 1a, indicate the type of public charity status you are requesting by checking one of the choices below. You may check only one box.  '''Box 5h most closely applies to HacDC'''

: '''5h. 509(a)(2)—an organization that normally receives not more than one-third of its financial support from gross investment income and receives more than one-third of its financial support from contributions, membership fees, and gross receipts from activities related to its exempt functions (subject to certain exceptions).''' 

: ''HacDC qualifies more under 509(a)(2) rather than 509(a)(1), as more than 1/3rd of its income comes from "(i) gifts, grants, contributions, or membership fees, and (ii) gross receipts from ... sales of merchandise, performance of services, or furnishing of facilities, in an activity which is not an unrelated trade or business ..." and does not receive more than 1/3rd of is income from investments or unrelated business income.''

: 6. If you checked box g, h, or i in question 5 above, you must request either an advance or a definitive ruling by selecting one of the boxes below. Refer to the instructions to determine which type of ruling you are eligible to receive.  '''Box under 6b should be checked'''

: Request for Definitive Ruling: Check this box if you have completed one tax year of at least 8 full months and you are requesting a definitive ruling. To confirm your public support status, answer line 6b(i) if you checked box g in line 5 above. ''Answer line 6b(ii) if you checked box h in line 5 above''. If you checked box i in line 5 above, answer both lines 6b(i) and (ii).

: 6.b(ii)

: For each year amounts are included on lines 1, 2, and 9 of Part IX-A. Statement of Revenues and Expenses, attach a list showing the name of and amount received from each disqualified person. '''None''' ''Aside from the officers, HacDC has no disqualified persons as long as no person has contributed more than $5,000.  A legal argument can be made the officers are not technically disqualified persons.''

: For each year amounts are included on line 9 of Part IX-A. Statement of Revenues and Expenses, attach a list showing the name of and amount received from each payer, other than a disqualified person, whose payments were more than the larger of (1) 1% of line 10, Part IX-A. Statement of Revenues and Expenses, or (2) $5,000. If the answer is “None,” check this box. '''None'''  ''I don't believe there is anyone who contributed more than $5,000 to HacDC in aggregate''

: 7. Did you receive any unusual grants during any of the years shown on Part IX-A. Statement of Revenues and Expenses? If “Yes,” attach a list including the name of the contributor, the date and amount of the grant, a brief description of the grant, and explain why it is unusual. '''No.'''  ''This would be if HacDC received a windfall grant that would wreck the 1/3rd formula.''

== Part XI: User Fee Information ==

Unfortunately, HacDC does not qualify for the reduced user fee.  The application will cost $750.