One more thought, has the piece been torn apart by well-meaning volunteers who moved on to "greener pastures"? How often has it happened where an individual or a group of volunteers tear into something only to discover much more "wrong" than they originally thought and either get no support from the managers or, usually, become so overwhelmed with the project that they leave? How many steam locomotives have been taken apart by individuals who really don't see how much money/time/effort it's going to take to get 'ole 186 back into operations?

The basic question comes to "Is it better to have 5 pieces of operating and/or fully-protected equipment or 25 pieces of rusting/rotting equipment?" Once that question is answered, then an organization can move forward with a plan to either preserve what they have or find homes for excess pieces. One man's trash is sometimes just trash, other times it becomes a treasure.

Rob

IMHO - it is MUCH BETTER to have the five pieces totally restored and interpreted than 25 or 125 pieces or even 525.

That being said, by looking at most museums, I am in the minority.

To extend the question, Is it better to have 5 or 10 pieces restored or under cover or have preserved 50 pieces, unrestored, but well stored in carbarns or other appropriate shelter?

I would suggest that dragging what ever carbody or car to your site (and leaving it outside to rot) is not preservation, housing said artifact in an enviorment which will preserve it is preservation. Restoration is a step beyond preservation, and is meaningless without first preserving the object.

Places like Union, Rio Vista, and Orange Empire have or are headed towards having most of the collection including the chicken coops inside. Once we get our stuff inside we can make rational decisions on how to proceed with restoration and display.

In response to "can you make a profit as a non-profit?" the answer is yes but how that income is treated depends on your mission and how you are making your profit, or retained earnings as they are usually called in the non-profit world. Non-profit is a tax status not a business plan and if there are no retained earnings - or simplistically if your expenses always exceed your income - your non-profit will go out of business.

Income that is not related to your mission is subject to UBIT (unrelated business income tax). Income that is related to your business is "probably" tax exempt but consult a non-profit tax specialist to be sure.

Hope this helps,

--Richard

Aside from Richard's excellent summary of the tax laws, all I can add is, no, Strasburg Rail Road is not a not-for-profit. It is a for-profit joint stock company operating under its original charter of incorporation.

There is a limited amount of time and money for most of us. IMHO - its still better to have 5 restored and displayed pieces of equipment rather an 15 outside or inside. It still costs time and money to build the building and move the artifact - time better spent on the 5.

As a retired railroad marketing officer, let me offer some comments and information. I see no reason why a non-profit 501(c)3 cannot charge for switching cars. After all, you charge admission and collect fares, don't you? The switching revenue above costs would have to be applied to furthering the purpose of the non-profit.

Now, you get into who pays you the revenue, how it is apportioned, and how many shippers there are to determine your status. Are you a common carrier? If you are, you are subject to the Surface Transportation Board's regulations on railroads. If you serve more than one customer, chances are you'll have to register as a common carrier and publish tariffs. If not, you can lease your property to the shipper as a private siding for freight purposes only and charge him to move cars to and from your interchange. This would be in addition to the freight charges assessed by your connection. If he's good, he'll get the connection to give him an allowance to get it back.

If you're good, you can get your connection to pay you a switching charge out of the through rate, but chances are you'll have to become a railroad subject to the STB to do this. If you and your shipper are masterful negotiators, you might even talk your connection into a though rate with a percentage division. This way you get to collect the whole freight charges and hold the money for a few days if prepaid outbound or collect inbound.

As to the shipper specifying the use of your steam power on weekends, that's between you and him. I recall a General Superintendent of a short line telling me "A passenger train will operate on the XXX only over my dead body." I reminded him of that when I boarded a passenger special on his short line during a Shipper's Advisory Board meeting. His largest customer was Board President that year. 'nuf sed.

There are I.R.S. regulations telling what to do, and what income tax to pay on any profit from Unrelated Business Income. See the instructions for Form 990 and its schedules. Instead of complying with those rules, your betters will just tell you to shut up because it isn't allowed.

While not a qualified financial or accouting advisor, I can tell you by way of anecdote that you most certainly can make money as a 501-c3. AND, if that money is made through activities related to your charter and mission, then there would most likely be no tax consequence. HOWEVER, if you decide to earn money by renting out some of your land for a non-rail-related venture, then you get the benefit of paying 30% of every dollar earned above expenses in taxes. It is called unrelated business income tax and it really can bite you in the butt. Sure its great to have income to pay taxes on, but if we were to start a for-profit sister entity, the regular coprorate tax rates are much friendlier up to $75,000 of income at which point the rate becomes 34% for corporations.

Jim, it's not a zero sum game. Money spent on buildings and land do not rob from the money spent restoring. Much the opposite, the building causes new money to come your way. First to help with the noble goal of the building. And then to restoration, now that restoration is no longer a Sisyphean struggle against the weather.



Carbarns are expensive, but they're not THAT expensive, and just the kind of "bold" that inspires fundraising. Cover all 25. Done.

How many musuems have you seen fail because they built too much covered storage? None. It'll never happen. But many fail because they built too little, and never protected their equipment, nor established permanence in the hearts and minds of their members and community. "Too much carbarn" is a problem you want very very much.



I think it's a mistake to go to pains to only cover pieces deemed valuable. The arguing about which those are will keep you stuck. Cover everything.

Simply having covered storage will cause pieces of equipment to come to your museum, as caretakers realize yours is a better home for their beloved piece. You'll be able to pick and choose. Meanwhile your trade bait is out of the weather.

Obviously, trading will cause those so-called "hard decisions". But the bitterest arguments are the academic ones, and what goes in a fictitious nonexistent barn is an academic argument. What goes in a real one is not! IME those decisions get made quickly and with little pain. Last time I sat in on a meeting, it took 8 people 1 hour to decide which two pieces would get bumped. No tears were cried; all eyes were on the prize of getting two awesome pieces indoors.

"Non-profit" refers to individuals profiting from the business. You can't take dividends from a non-profit. A non-profit's money can only go to other non-profits.

Non-profits better make a profit!

What's more, non-profits can invest their money as they please, and they don't pay tax on the gains. Invest in YHOO stock? Many nonprofits do. S&P 500? Scrap metal futures? CSXT? Toyota dealerships? Desperately needed McDonalds franchise in your community? That is allowed. All of these are legitimate places for a non-profit to invest their money.

So -- what if the non-profit owns 100% of the stock of a for-profit company? All the same applies. This is legitimate and the non-profit pays no tax on the gains (dividends). of course, the for-profit subsidiary pays taxes in the ordinary way all for-profit companies do, through a corporate 1040. That's how the IRS gets their pound of flesh, and they're happy.

That is often the best way for a non-profit to do "unrelated business income". Create a for-profit subsidiary for that purpose, and keep things clean and simple tax-wise.

Can you be a non-profit organization and still make money?

Mr. Boone, the unfortunate aspect of the term nonprofit is that it misleads people (along with contestants in the annual, biennial and quadrennial advance auctions of stolen property we like to call elections who like to demonize profits as a way of spending OPM -other peoples money) into thinking that a business (any business) can be operated without attending to the bottom line.

Nonprofit organizations really should be referred to as tax exempts or not for INDIVIDUAL profit.

While a TE cannot have stockholders who receive dividends it not only can and may (both the permissive and capable verbs apply here) a Tax Exempt (TE) make money, IT must be profitable or it will not survive.

To be a a non profit, the following greatly simplified conditions must be true:

It must have a purpose that qualifies for exemption for tax (charitable, educational, etc)
It must be organized as a nonprofit
It must operated in furtherance of of its exempt purpose.

If a not for profit makes unrelated business income, e.g., income from operations outside the scope of its exempt purpose (within reason), it simply pays Unrelated Business Income Tax (UBIT) and declares it on its 990 return. There's even a safe harbor that if something is substanntially operated by volunteers, it considered wthin the tax exempt purpose-which is why your local library can sell candy or your fire department can have an annual chicken barbeque.

So yes, a nonprofit museum properly situated to accept interchange can do so-commercial freight would not be charitable or educational, of course, so the NFP would remit the appropriate tax to the IRS.

That having been said, Strasburg has stockholders, so its not a tax exempt.

Check out IRS Publication 557 here



http://www.irs.gov/pub/irs-pdf/p557.pdf