We should close on the easement sometime in early April. You may be wondering; “What’s next?” Very good question, we have engaged a law firm (Cheshire Law Group) that specializes in non-profit organizations. They have a tax expert on non-profit tax law. (Think about that a second, if non-profits are exempt from taxes, how many tax experts are going to specialize in non-profit tax law? That specialty is hard to find.)
We are faced with two major problems: 1) How do we minimize the tax implications of the easement income? and 2) how do we avoid having our investment income from investing that money exceed the 70/30 rule. Seventy(70) percent of our income as 501(c)7 must come from our members. So investment income that exceeds 30% is taxable and may cause us to lose our tax-exempt status. When we invest the money from the easement our investment income may be on a par with our dues income.
Cheshire researched these issues for us and presented their results to a small working group of us: Wolfgang Thamm, John Simkiss, Peter Quigley, Phil LaRue, Steve Bridgman and myself. A PDF of that report is available in our documents library. Look for the document “Report from Cheshire Law Group” (you must be logged in to view this.) The report outlines three possible paths:
- Continue as a 501(c)7 [Social Club] with set-a-side money that we would use for charitable purposes.
- Create a sister organization that is a 501(c)3 charitable organization and run two organizations in parallel.
- Convert the entire club to a 501(c)3
After the lawyers presented their results, the group of six of us met to discuss the report. It was apparent to all of us that continuing as a pure social club was going to be problematic. Simply trying to keep the investment income below the 70/30 rule would cause us to make investment choices that would simply not make sense.
Creating a sister organization is attractive, however the complexity of attempting to operate two organization, keep two sets of books and keeping track of which organization owned what, appears to us to be more than an all volunteer operation would be able to do without getting into trouble.
That leaves us with converting the entire operation to a 501(c)3. There are challenges to this as well, but we are encouraged by the fact that many other Soaring clubs have 501(c)3 status. (Several are listed in the report.)
What will change if we become a 501(c)3? Our by-laws will need to be updated. Specifically the Purpose and Dissolution sections. Our current purpose is close and should not need a lot of change. In the Dissolution section we currently have a provision to return some entrance fees to the members. This will have to be removed. I’m sure a few other sections will need some updates, but by and large most of our by-laws should remain the same. We will be prohibited from politicking, not that we ever did much before. I’m sure there are more items to consider, we will keep you informed as we understand more.
The conclusion of the group of six was then presented to the board and we invited two members of Cheshire to attend the last board meeting. We had a very good session with several great questions. We have instructed Cheshire to move forward with the detail planning of converting PGC to a 501(C)3.
I know this has been a lot of information to digest, especially if you have downloaded and read Cheshire’s report (which I encourage you to do.) We will be discussing this at the membership meeting. And will be having a special membership meeting LATER THIS YEAR to vote on the conversion AND REQUIRED BY LAW CHANGES.
In case you have not heard, the spring meeting will once again be via Zoom. According to our Public Health chair things are improving quickly, but we felt that we would not quite be there for the spring meeting.
- Trailer Slot South Hanger, $6000, contact the secretary.
- SXNAV S10 Vario for sale, contact Jack Goritski
- Also a trailer slot in the sough Hanger is available for rent.