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Notes from call with Jesse on December 17, 2020, about drafting new event contracts.
- jesse: say you had events that were clearly not gonna be charitable, no way they'd be a 501c3 and moreover couldn't be fiscally sponsored, but the income was gonna be enough to pay the tax, eliminating them would cost more than just paying the tax. i looked back at the notes from the conversation in july, and somebody (robb?) said 95% of what you do is already charitable. so maybe let's try to make sure that even those groups' events could be qualified as charity.
- say somebody's distributing food to homeless people and not a nonprofit. you could set up a fiscal sponsor, omni could pass donations to that group, and as long as they're used for a charitable purpose, it's fine. say an outside group without tax-exempt status wants to have a purely educational event at your space. you'd sponsor it, say it's omni, and omni would (with some form we could develop) essentially deputize the group to do it as an omni event, could say "cosponsored by omni".
- when they collect money, it doesn't go into their bank account, it goes into omni coffers. that wouldn't cause a problem with welfare exemption.
- robb: if they collected donations at the door or sold tickets, could we have an arrangement that they could share in the revenue?
- jesse: yes. it'd be similar to a fiscal sponsorship agreement, where you give them most of the money and keep an administrative fee. we could work it out a few different ways. the key point is that money you pass them has been used specifically for charitable purposes. they have to give a report of some kind documenting how they used it. our space use agreement would say "we agree the first $200 should go to omni, and any additional we grant to you exclusively for charitable purposes." that'd be a flat fee. you could also split 50/50 or whatever. point is the money starts out with omni and then goes to them.
- maryann: is it possible to do that all in cash at the door?
- jesse: yes
- maryann: at la pena, when a nonprofit or something that wasn't yet a nonprofit did an event there, la pena sponsored it, we put it on our program, we collected the money at the door with the LP staff person, and then at the end of the event we signed an agreement where they gave us a certain amount of money and a receipt.
- jesse: essentially yes. you can collect it as cash. but the way it'd look on paper, however the money was collected, it was omni money and then it went to someone else exclusively for charitable use.
- maryann: i'm just trying to find the easiest way to do it. i did a lot of event planning for chiapas support committee for 15 years. if someone had said "we're gonna put this money in our bank account and then give it to you" that'd be off putting.
- jesse: no, it wouldn't have to go into a bank account. just imagine you're doing an omni event that brings in $100 in cash. say you have an expense you're gonna pay in cash - reimburse them $50. but still on your 990 form, you say you had an income of 100 and then an expense of 50. you show that expense as a grant. Great that LP had a person sitting there, but you wouldn't necessarily have to have an omni person sitting there. keep in mind omni as a corporation can deputize anybody to hold an event and keep track of it. all they'd have to do is tell you the total and you can write it down. the cash doesn't have to change hands.
- maryann: in the LP rental agreement, they said they got 30% of the door or 250 whatever is greater.
- jesse: that's a great way to go. if it were me, i'd have different pieces of paper - you could just have a flat fee or a split. the most positive one to the group renting it is that it's just a percentage, there's just a minimum. there might be groups you want to help out, you just do a straight percentage. or others you might want to maximize. either way in their publicity they have to say "omni commons in collaboration with this other group, presents". similar to a fiscal sponsorship. the check people would write is to omnicommons with the
memo "for use of etc etc"
- robb: do they have to report how they spend it, or can we just stipulate in the agmnt?
- jesse: if you write a fiscal sponsorship agreement collective .... the tides foundation usually shows how they spend it, but you could write one that says "here's the money..." there's definitely groups who you know they'd spend it on, and you could write that in. but if you're not sure what they'll spend it on, you can say "within 6 months you'll show us a receipt showing it was spent on charitable purposes". but from your point of view the best case scenario is to have some backup/receipt. you'll feel more comfortable if you do ask for that. but i can't imagine... when you put out money you want to have some backup to show it actually was for charitable purposes.
- yar: what if they take all the cash? 0/100 split.
- jesse: i don't think that'd be a problem
- jesse: it'd be good to have a form that looks like a fiscal sponsorship but has a space rental
- robb: so it's not important that we get the money, just that it goes to a charitable purpose
- jesse: yes
- maryann: and this would apply to anywhere in the building that we'd let a non-501c3 use the building? the lobby, the kitchen, wherever?
- jesse: yes, correct. what we discussed in july... [hold to accept a package] you can get a partial welfare exemption. like if CCL uses 15-20% of your space, that's fine. say you have a kitchen that's mostly for nonprofits and other spaces aren't, i think that'd be fine. if they're not compensating, that's a problem. but if they are, it's ok. i think it could work for any space.
- robb: so could it be like one FSA with 3 different scenarios? like a checkbox for Model A, Model B, Model C? or 3 different contracts?
- jesse: either one is fine. checkboxes is fine. in the modern world, having 3 on the computer is clearer, but whichever you want.
- jesse: i can't get it done tomorrow before my vacation, but pretty early in the next year definitely
- some concern about an event in late january
- jesse: if the tax form is 2021, as long as we get it documented, we can say "yes, let's do it, here's how" and if they want to do publicity, we need to say, "omni commons in collaboration with..."
- robb: what about a small thin font, "omni commons presents" and their name could be kinda big?
- jesse: yeah that's fine. it's workable.
- yar: could we have a different brand with a "does business as"?
- jesse: yes, you could have a DBA
- robb: what about using Omni Oakland Commons, which doesn't own property or have to pay property taxes?
- jesse: that's a smart and excellent idea. gold star. if OOC still has its tax status. keep in mind when you go to do your welfare exemption, there's a box that says "did you rent to any nonprofit?" and then they also have to fill in paperwork with the county. there'd be an extra layer of hassle. but not that much. it needs an "organizational clearance certificate". takes a while for the BOE board of equalization) to offer one. i think it's a 267 form. now, say you do that - does that org have insurance? if so, then yes, it does add liability protection. they'd be the responsible party. but they'd need some roughly kind of ... if it was shown that it was only a transparent shell corporation that didn't do anything, didn't have assets or members, there's a doctrine called "alter ego liability" / "piercing the corporate veil", the court can disregard that. so idk the answer. as an aside, when i was a litigator i actually won a case where the court disregarded a shell corporation for liability.
- an entity with no assets and no insurance is just an empty shell, courts won't buy it. insurance provides lawyers to make arguments.
- robb: OOC might already have insurance for board & officers. not sure about general.
- jesse: what's OOC doing? is it paying?
- it's sleeping, but it does have different officers on it. it's paying insurance and needs to catch up with the state on something, but it's just sitting there.