Event:2015/06/29 Until the Revolution Working Group

6/29 Meeting

Attendees

• Laura, yar, Jenny, Ben, Jessie, Matt, Marc

SELC report-back

• jenny: we talked about the difference between a charitable trust and a 501c2 which would keep liability separate. 501c3 would control the 501c2. A lot of churches & universities have 501c2 holdings. If a c3 runs property it has to do so at market rate, not discount rates which is what we do. c2 has more flexibility & control over property management. donations to c2 wouldn't be tax deducatable but peeople can just donate to the c3.
• you want a checks & balances structure. c3 could have a subsidiary (for-profit or llc or c2 or whatever) and a contract between these two entities. another option is a contract between omni's c3 and a land trust - they'd own the land, we'd own the building or something.
• laura: really? i'm not sure about that market-rate restriction. under what conditions do you need to rent market rate?
• matt: there's 1600 c2s in the whole country. it's called a title holding corp. very rare. c3s are popular because overhead of applying gets you tax deducatable donations, whole body of established law. but c2 could be run like a land trust. if you wanna start your own land trust this'd be a clever way to do it. maybe do it later? what would the transfer look like from a c3 to a c2? ask SELC.
• matt: also, we should be saying "community land trust" very specifically. it's a c3 whose mission is to conserve land for people. there was a movement by "experimental libertarians" on farms in the 70s which created this law or something
• marc: what's the benefit of a c2?
• matt: less to deal with.
• laura: c2 can only exist as a possession of a c3
• jessie: reading a random website, says c2 is "preserving land for community use". doesn't that imply prorated or sliding scale, not market rate?
• marc: we want a separate org to own. mitigates possibility of it going out of community use.
• jenny: checks & balances
• matt: jesse (palmer) doesn't think so. we've got jesse, us, potential lenders might have their own requirements. landlords have their own terms like in our lease. we also have lots of other small donors. potential big donor talked about the model for housing ... they can help finance. they want us to show we're in for the long term, not going to play in market speculation or financialization. but jesse's saying that's too complicated. just get a CLT, c3 gets a 99 year lease from it. no bank would mortgage a split property because it's hard to foreclose on.
• marc: lender would need to give money to land trust. how'd that money flow? who buys it?
• matt: we buy from the landlord. then we donate the land to CLT. then they lease to us.
• jesse: option #2 doesn't actually say c2. is that the c2 option?
• Laura: no... c2 isn't on that chart
• jenny: asked for critiques of land trust model. people love it. only critique is wrt affordable housing - deprives people of upward mobility by acquiring property.
• laura: because they're not making equity. land trust does.
• yar: surplus, not profit
• laura: people will want to pay a lot less for a split lot. it lowers the value of the property.
• matt: story about community housing where everybody did own but they sold out and everyone became yuppies. how do you stop that? but we're robost because its' not housing. womens building still has their building.
• jenny: trust doesn't have liability protection, c2 does. "must keep beneficiaries informed" ... ?
• laura: c3 operates as charitable for a broad class of people
• matt: ah, irs needs it to benefit a class of people AND it's a trust so has to benefit beneficiaries (?)
• jenny: and you can put restraints on future sale in the trust document. like it can only get sold to specific people or orgs or types of nonprofit. more longitudinal (?)
• matt: you're talking about the family trust model
• jenny: i have "charitable trust" written. benefits a broad class of society.
• matt: same thing
• laura: i thought charitable trust benefits specific people, like that commune [black bear] but c3 benefits broad class. maybe if c3 owns trust, there's a broader def of beneficiary
• matt: this is something totally new. charitable trust is "when you leave part of your ?? with the state for when you die" so you're exempt from taxes while you're alive. but this type of trust is about rel bw trustees & beneficiaries. it's not a corporation. story about rise of corporate power in society. normal trust is a relationship, not protected, could be hounded & sued, assets threatened wtih bankruptcy until they give up the land.
• jenny: they also recommended we check with:
  • Bay area consortium of community land trust - ask them about the rel bw owner of the building and trust
  • ??? land trust? ??
  • ??? oalkand land trust??
  • dudly street initiative in boston, which owns urban farms and has broad revitalization mission
• jenny: unfo more of a learning experience for them than me!
• question about confidentiality of donor and ability to talk to lawyers about them. decided to give permission to talk about it because that won't come as a surprise to them at all.
• laura: suprised about the c2 thing we didn't know about before
• yeah not many people know about it
• marc: seems good but more work than land trust model
• matt: we have 3 qs. 1) can you transfer property from c3 to c2? is it taxed?
• laura: c2 is allowed rental income but what about event venue income?
• marc: c3 would be subletting. as long as we can put it in c2 without taxation that's doable. but i'm concerned about needing a board. would have to be big and not overlap with c3 board at all. are we at that stage?
• jenny: no it'd HAVE to overlap
• laura: there'd have to be [??]
• matt: asking people to do even more work
• marc: c2 would be contractually bound to as many orgs as possible to never ever sell and only use for this purpose. but does sound like lots of extra bureaucaryc
• matt: plus c2 income ... what happens?
• laura: it has to go to the c3. collectives could pay rent to the c2, and that income gets turned over to c3.
• matt: is it still taxed because it's rental income? ask lawyer
• marc: we'l do whatever makes sense, no problem either way
• matt: but c2 supposed to protect us from taxes, which is a c3 issue. if it doesn't then no point
• marc: not an issue. purpose is charity. just need to write a charitable statement. BMR income means you're giving away money.
• jesse: but jenny said 501c3s can't rent at BMR
• marc: but what if that's the whole point of the 501c3 - to give below market rate rentals as charity?
• matt: it's not supposed to be. cuz you're competing with capital...
• laura: reading this: http://www.irs.gov/pub/irs-tege/eotopich86.pdf
• jesse: let's talk to lawyer about c2 and all the things about rent and stuff. we all don't know enough but someone else does.
• matt: selc was giving us an opportunity to be experimental, open up a whole field of law
• jesse: but you can't actually backtrack from tthe land trust. once you give them the land, they have it forever
• matt: but if we learn you can sell to a c2 later without tax, we can own without the land trustt.
• yar: question..
• matt: no, jesse said the ONLY thing that works is a culture. what survives? but do whatever lender requires of you. but lender is flexible, just wants to convince themselves that it'll survive. don't want to be the bad guy taking the building away.
• jenny: but his suggestion was to create another nonprofit or find one.
• laura: i wonder if lender was thinking of the other trust model? i think he was thinking just the CLT model.
• matt: i think he's talking about both, mainly #1 the nominal trust which is used for shitty things. but risks are the same. even with a CLT owning land it has the same problems. if shitty people get on the board like north california land trust, you're running that risk. old trust model has that same risk of bieng corrupted
• larua: but that could be true for any c3 you have a contract with
• matt: exactly
• jesse: so we don't want omni to have a c3 just owning it, because we don't trust ourselves to pay the mortgage?
• matt: maybe won't need a mortgage, maybe rest of the money will appear. but other risks: we're so irresponsible, community becomes apolitical hipsters who want to leverage property for a community working space for their own private properties and then fuck that up and lose both bldgs. lender's paranoid about htat. in housing people take second mortgage loans and then banks get houses and that's why san francisco is fucked
• jesse: so whose culture do you trust more? omni or land trust? anyway, how does c2 prevent that?
• matt: let's move into the exercise... the matrix...
• jesse: does c2 mitigate the risk of gentrification displacing us and we're replaced by hiopsters
• matt: maybe... you can have clauses in bylaws. can only sell to kinds of nonprofit. can have oversight from other c3s. can have members who legally need to be consulted with 90% approval.
• jesse: but membership means a lot more legally
• matt: no you can create board or membership in c3
• jesse: but in terms of collectively owned space member means a lot. noisebridge people were talking about this.
• matt: omni copied boilerplate from NB. you can change it. they can be volunteers, beneficiaries...
• jesse: but when land is owned collectively, the word member has previous litigation
• laura; collectively owned means all our names are on the deed. we're not doing that.
• matt: yeah it's true members have "rights" but you don't have to give them rights to control/own everything. goal is to keep board from doing stupid shit

Link Dump

• Notes from SELC legal cafe: https://pad.riseup.net/p/selccafe
• Community Land Trust: https://communitylandtrust.org

Action Items

• Talk to Jesse about 501c2 option & BMR event rentals