West Lanham Hills

Report of the Committee on Financial Policy

November 5, 2008

This report was given by committee chairperson Kate Tsubata at the November Association meeting.


Report of Committee on Financial Policy

MISSION OF COMMITTEE

The committee has tried to investigate and report on the rights,
roles and responsibilities of a 501(c)(4) and to make suggestions on
the usages of funds in accordance with the spirit and guidelines of
the law and our Association's purpose of existence.

Background:

The West Lanham Hills Citizens' Association is incorporated "for the
purpose of securing the advantages of joint and concerted effort to
maintain the health, safety, general welfare and integrity of the
community." (Articles of the West Lanham Hills Citizens'
Association, Art. II, Purpose)

The IRS 501 (c)(4) Status under which we are tax-exempt states:
"To qualify for exemption under section 501 C (4), the organization's net earnings must be devoted only to charitable, educational or recreational purposes. In addition, no part of the organization's net earnings may benefit any private shareholder or individual." If the organization provides an "excess benefit" to certain persons, an excise tax may be imposed.

"To establish that your organization is organized exclusively to
promote social welfare, you should submit evidence with your
application showing that your organization will operate primarily to
further (in some way) the common good and general welfare of the
people of the community (such as by bringing about civic betterment
and social improvements.)"

Further requirements:

1) May not restrict use of facilities to employees, members and
guests.
2) Cannot represent interests only of members, but must be full
community.
3) Cannot campaign for political candidates or parties
4) If social activities are primary purpose, the organization cannot
be 501 (c)(4) 4, but must file as a social club (501(c)(7)
5) Cannot have retirement benefits or death benefits as main
activity, unless an arm of a local government.
6) Donations to the organization are not tax deductible, unless it is a fire company and the donation is for exclusively public purposes.
7) A homeowner association is eligible if its activities benefit the whole community, that the facilities it serves are open to the public, and it is not engaged in the exterior maintenance of private homes, such as for a condo, coop, residential management or timeshare association.
8) Approved purposes for a 501 (c)(4) include:
a. Maintaining a local airport for public use
b. Improve public services, housing, parking, free newspaper,
sponsoring sports leagues for the community, holiday programs, meetings, contracting with private security service to patrol the community
c. Preserving community traditions, architecture, appearance, and
representing the community before legislative and administrative agencies for zoning, traffic, parking, etc.
d. Encourage industrial development, relieve unemployment, make loans to businesses
e. Holding festivals of regional customs and traditions

Committee Recommendations:

It is the unanimous opinion of this committee that the WLH association, in order to have full compliance with the tax exempt status afforded us, should invest in educational, charitable, and recreational action for the general welfare of the entire community.

We find that until now, the majority of our funds have been spent on only one of these three. We would like to diversify our efforts to provide a greater emphasis on programs that will empower the entire community. We would also like to encourage a spirit of inclusiveness and not exclusiveness amongst our neighbors.

MISCONCEPTIONS about what we can and can't do legally:

There are some general misconceptions concerning West Lanham Hills and the non-profit 501(c)(4) status. Some of those misconceptions that were researched by the committee are addressed below.

MISCONCEPTION-The activities or funds of the association cannot benefit an individual
TRUTH-Generally, an individual may receive a benefit if it is designed to promote the welfare of the entire community.

MISCONCEPTION-That the association cannot "buy can of paint" or help people with house repairs
TRUTH-We can buy paint and do improvements as a part of a community-based project if it has a purpose that serves the general community. The restriction is that our type of association is not for the purpose of maintaining the properties of the members, as a condo association is.

MISCONCEPTION-That we can only spend the interest earned on money the association has in savings.
TRUTH-The IRS has no restriction on the amount that can be spent, only that it must be for the general benefit of the community (charitable,
educational, recreational). The WLH Citizens' Association Bylaws recently ratified reserve a base amount of $400,000 that cannot be spent without a vote of 2/3 of the membership. There is no law, rule or regulation preventing our membership from voting to spend any funds other than the $400,000.

MISCONCEPTION-""What we have done in the past has to be in the future."
TRUTH-What may have been useful in the past may no longer serve the
community today. A far greater number of options that would strengthen our community are permissible legally, and positive suggestions should be welcomed.

MISCONCEPTION-That we cannot buy equipment because of storage, safety and usership issues
TRUTH-IRS regulations do not restrict purchase of goods and equipment which are used for community purposes. WLHCA Bylaws prevent payment of officers, but do not prevent us from purchasing items needed for the activities and projects that help our community.

MISCONCEPTION-We can limit Association activities to members.
TRUTH-The IRS tax exempt statutes prohibit us from doing things only for members. They must be open to the general community or we risk losing our exempt status.

MISCONCEPTION-We can use our funds largely for social gatherings.
TRUTH-If we focus on social events, we can be found to be a "social club" and lose our tax exempt status.

List of current and possible projects that could be done by WLHCA:
A 501 (c)(4) organization funds may be used for charitable, educational and recreational purposes.

Current activities held fairly regularly are:

1) Association meetings (administrative and communication functions)
2) Community clean ups (health and safety)
3) Newsletter distribution (communication, education, administration)
4) Seasonal gatherings: (Social, some networking and information sharing purposes)
a. Christmas Dinner/dance
b. Easter crafts party (some educational stuff)
c. Halloween party (helps prevent vandalism, crime, protection of
kids' safety)
d. Santa's workshop (educational also)
e. Christmas Caroling (outreach and good will, some education, youth involvement)
f. Bus trip
g. Family Fun Day
h. Back to school (supports education)

l) Educational
a) Scholarship fund
b) Tutoring program
c) English/Spanish language exchange
d) Other ESOL events and classes
e) Computers (laptops, etc.) to be used by community as a whole
(laptops, Internet cafe, donated computers, building or fixing computers, etc.)
f) Library-access

2) Charitable
a) Volunteer-based projects to help residents with important needs
b) Educational activities
c) Create specific funds to help with perceived need areas
(educational, emergency, etc.)

3) Empowering of Residents
a) Civic betterment
i) Help involve youth in community discussion and decision-
making
ii) Expand interactivity of association through more web
presence and services
iii) Actively seek public agencies to provide no-cost services to our community
iv) Reach out and include more neighbors as a regular goal with every activity
b) Recreation:
i) work to give youth and adults better facilities for playing sports and games
ii) Increase access to public facilities (pools, leagues, etc.)
iii) Support regular activities for fitness, safety, health,
awareness
c) Shelter safety
i) Promote education on avoiding foreclosures
ii) Help work with elderly or infirm neighbors to correct
housing safety issues (Christmas in April type program)
iii) Work to stop deterioration (broken window syndrome) for
safety and crime prevention
iv) Sponsor efforts to get houses numbered
v) Provide information on agencies for specific safety concerns
d) Transportation
i) Consider community vehicle for various tasks: patrolling,
transporting residents, pick up of items, etc.
e) Food
i) Facilitate neighbors' access to available food resources
f) Utilities
i) Help residents deal with issues of heating, electricity,
water, phone, or other necessities. (Informational clearinghouse, etc.)

4)Facilitating safe, healthy, positive environment
a) Community cleanups, (already in place)
b) Information given out for bulk trash, hazardous waste, recycling, etc. (in place)
c) Traffic safety advocacy (speed.,. traffic calming, lights, access, pedestrian safety)
d) Safety, security, crime prevention:
-Re-establishing neighborhood watch
-Cameras at key areas?
-Quick alert system for break-ins, car theft, accidents, etc.
-Parking concerns

5) Supporting entrepreneurship and employability of residents
a) Entrepreneurial projects and economic development projects:
-microlending
-Resume help
-Help make flyers, brochures, ads, business cards
-Skill development seminars
b) Increase support and interactions with business community
c) Help connect people to jobs, and advertise jobs for people


Things to note:

1) The newsletter helps fulfill many of the above functions, and can be expanded in what it contains to cover many of the above purposes
2) Engagement of new residents, isolated residents, and youth can be done in many ways.
3) Focus can be made on cooperative efforts rather than "one person doing it all."
4) A directory helps with many of the informational issues described above.

Goals:

1) How to continue to offer "get together" events (traditional celebrations at holiday seasons, etc.) at less cost?
2) How to increase "buy in" by residents with co-operative activities and events. (Pot lucks rather than catered events, less expensive equipment for certain activities, eliminate some events or make them more accessible, etc.)
3) Expand existing low-cost or no-cost services. (Check public sources for transportation, library, employment and enterprise training, etc., that we could bring here)
4) Engage those who are not presently active?
5) How to make good use of the collective skills and talents and unique
characters of our diverse population?
6) How to increase intergenerational collaboration?

Here are websites with info about the 5Ol (c)(4) status.

http://www.t-tlaw.com/lr-05.htm

http://www. irs. gov/pub/irs-tege/eotopici03.pdf

Email us
jimgunther@msn.com