Railway Preservation News :: View topic - Profit vs. Non-Profit, We've been through this before but...

The first is political - they have stopped giving money to the Boy Scouts since they are not a politically correct organization.

Quote:

A non-profit is a business conducted by on behalf of an individual or group of individuals for SPECIFIC purposes (any legal purpose will not suffice here-the purpose must be an "exempt"-from tax- purpose) prescribed in its founding document with the intention that it will conduct its business and WILL NOT return its profits TO THE INDIVIDUALS who own the corporation.

I think it is worth pointing out that, at least in the two states where I have been involved in not-for-profit railway museums, the corporations actually are not owned by any individuals. The corporations and their assets are technically owned by the State in which they are incorporated, not the members, and managed by a Board of "Trustees", who are expected to act in the best interest of the oraganization and the state. Thus, at least in Maryland, the Baltimore Streetcar Museum was able to invoke a protection against lawsuits known as "sovereign immunity" which is only available to the States.

We all know what a "for-profit" enterprise is- it is a business conducted by or on behalf of an individual or group of individuals for purposes prescribed in its founding document (although today the purpose is often "any legal purpose") with the intention that it will conduct its business and return its profits TO THE INDIVIDUALS who own the corporation

That's it folks, the major differences between the two is whether or not the entity pays dividends to individual investors and the scope of the operations.

Author:	superheater [ Thu Nov 25, 2004 11:23 pm ]
Post subject:	Profit vs. Non-Profit, We've been through this before but...
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Author:	Ray Reter [ Fri Nov 26, 2004 8:49 am ]
Post subject:	Re: Profit vs. Non-Profit, We've been through this before bu
Superheater, It should be pointed-out that many of the organizations that are members of the United Way are bonafide, worthy individual organizations. It's the "umbrella" collection/solicitation organization that seems to have had its problems recently. -- Ray

Author:	eldiner [ Fri Nov 26, 2004 5:40 pm ]
Post subject:	Re: Profit vs. Non-Profit, We've been through this before bu
I have a couple of thoughts about non-profits. First, large corporations still make a big push for their employees to "volunteer" to contribute to United Way (I continue to resist the urge to "volunteer"). United Way fails to work for me for two reasons. The first is political - they have stopped giving money to the Boy Scouts since they are not a politically correct organization. Second, and more important to railroad historical preservation non-profits, they spend a lot of money for overhead. Some of the recipients spend over 50 cents of every dollar for fund-raising, salaries, studies, etc. In most railroad non-profits we minimize overhead. I think it is important to be able to tell our donors that most if not all of their donation is going to an actual preservation project and not to raise more money.

Author:	Bob Kutella [ Sat Nov 27, 2004 5:26 am ]
Post subject:	Re: Restricted Donations
I think one of the strengths of the railway preservation community is the willingness to accept restricted donations where the organization absorbs the overhead and new money can be targeted virtually 100% to a designated project. I am sure that is not a universal paradigm, but where it exists it can be 'marketed' to prospective donors. The converse is United Way and others where you donate to an umbrella group and they dispense some remainder of that money after overhead. Due to complaints, maybe 10 years ago or more, United Way, with some effort, would accept donations where the donor could target a specific local charity; but they never said your donation would amount to any where near 100% by the time it got there. That message was blurred and it was always a hassle to include or exclude some of their beneficiaries. Bob Kutella

Author:	sc 'doc' lewis [ Sat Nov 27, 2004 7:45 am ]
Post subject:	Re:United Way and the Boy Scouts of America
Quote: The first is political - they have stopped giving money to the Boy Scouts since they are not a politically correct organization. I urge others to check with their local United Way Chapter to see what their policy is with donations to the Boy Scouts (and other groups "United Way" deems to be "politically incorrect"). The Media has made this seem to be a nationwide policy of the United Way organization and it apparantly is not (each chapter apparantly can direct donations as they deem appropriate). Here in Utah, BSA is still a recipient of funding from United Way. Personally, I donate direct to my favorites... sc 'doc' lewis

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Author:	superheater [ Sat Nov 27, 2004 11:12 pm ]
Post subject:	Re: Profit vs. Non-Profit, We've been through this before bu
Thats true, many are (still) worthy organizations under the U.W umbrella-at the risk of veering off board scope, there's two problems with the United Way-they (attempt to) politically blackmail organizations like the Boy Scouts and I see no need to surrender the power of my charitable purse to so-called experts. I'm sorry to hear their collection methods are still heavy handed. The bottom line is, just because its "non-profit", doesn't mean ipso facto that its pure as the driven snow. Caveat Emptor applies in charitable endeavors as well as purchases. Some for-profits would be far worthier of support than many non-profits.

Author:	Dougvv [ Sat Nov 27, 2004 11:33 pm ]
Post subject:	Re: Profit vs. Non-Profit, We've been through this before bu
I've had many experiences with United Way since i graduated college in 1980. Basically, I do not like the strong arm tactics to get you to "voluntarily" donate. If you do not donate, you are black listed and/or considered a Scrooge. I much prefer to find a needy individual or organization and donate the required item or hours directly to the "end user". Doug vV

Author:	Jim Herron [ Sat Nov 27, 2004 11:38 pm ]
Post subject:	Re:United Way and the Boy Scouts of America
Years ago, in my "non-railroad" job, I called on a chapter of the Salvation Army. One day I was talking to the director there who told me that the United Way's policy was to derive a total amount that they would assign to the Salvation Army each year. However, before writing a check, they would deduct the total of donations received by the Salvation Army from other sources and then give them a check for the balance. That, plus the strong-arm tactics of UW to force workers of companies that generally support UW to contibute, brought me to decide that I would never give UW a penny. Add to that the opulent salaries and facilities of UW management and the recipients get nowhere near the money collected. As others on here have said, I'll give to charities of my choice directly. I don't need someone else to decide where my contributions go. -Jim Herron

Author:	PJS [ Sun Nov 28, 2004 12:01 pm ]
Post subject:	Re: Profit vs. Non-Profit, We've been through this before bu
superheater wrote: Quote: A non-profit is a business conducted by on behalf of an individual or group of individuals for SPECIFIC purposes (any legal purpose will not suffice here-the purpose must be an "exempt"-from tax- purpose) prescribed in its founding document with the intention that it will conduct its business and WILL NOT return its profits TO THE INDIVIDUALS who own the corporation. I think it is worth pointing out that, at least in the two states where I have been involved in not-for-profit railway museums, the corporations actually are not owned by any individuals. The corporations and their assets are technically owned by the State in which they are incorporated, not the members, and managed by a Board of "Trustees", who are expected to act in the best interest of the oraganization and the state. Thus, at least in Maryland, the Baltimore Streetcar Museum was able to invoke a protection against lawsuits known as "sovereign immunity" which is only available to the States. Pete Schmidt

Author:	Randall Hicks [ Mon Nov 29, 2004 11:28 am ]
Post subject:	Re: Sovereign Immnunity
Quote: I think it is worth pointing out that, at least in the two states where I have been involved in not-for-profit railway museums, the corporations actually are not owned by any individuals. The corporations and their assets are technically owned by the State in which they are incorporated, not the members, and managed by a Board of "Trustees", who are expected to act in the best interest of the oraganization and the state. Thus, at least in Maryland, the Baltimore Streetcar Museum was able to invoke a protection against lawsuits known as "sovereign immunity" which is only available to the States. That's very interesting - I hadn't heard this before. Do you, Pete, think this is true by any chance in the other state where you have been involved? :)

Author:	JamesKissinger [ Mon Nov 29, 2004 12:33 pm ]
Post subject:	Re: Sovereign Immnunity
This is true in Indiana as the State's Attorney General is ultimately in control of these organizations and their assets. Jim

Author:	superheater [ Tue Nov 30, 2004 11:41 pm ]
Post subject:	Peter, You are right , so sorry.
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Author:	dwshearer [ Thu Dec 02, 2004 4:13 am ]
Post subject:	Re: Profit vs. Non-Profit, We've been through this before bu
Quote: We all know what a "for-profit" enterprise is- it is a business conducted by or on behalf of an individual or group of individuals for purposes prescribed in its founding document (although today the purpose is often "any legal purpose") with the intention that it will conduct its business and return its profits TO THE INDIVIDUALS who own the corporation Quote: That's it folks, the major differences between the two is whether or not the entity pays dividends to individual investors and the scope of the operations. It actually gets a little more complicated than "for profits pay dividends to individual investors". A "nonprofit" 501(c)(3) organization must submit a statement of support with each tax return. One of the qualifications of a "nonprofit" is that the support does not include more than about 30% of its income from an unrelated business. The IRS intention is that the nonprofits will not go into competition with the for profit companies. An example is the Yakima Valley Rail and Steam Museum Association in Toppenish, WA (see www.nprymuseum.org). The given nonprofit mission statement was to preserve the railroad history, equipment , etc, etc. When the old Northern Pacific White Swan Branch line went up for abandonment in 1992, the museum board cooperated with the county and state department of transportation to save the line by running a combination of passenger excursions and freight traffic to make enough money to continue operation and thus preserve it. This was done with all volunteer crews and was barely surviving until a new sawmill was built on the line in 1999. With the mill there were far more trains than what all volunteers could handle and the first employees were hired. No problem with the volunteer crew passenger operations on historic equipment and with various educational programs that went with it. The issue comes with UBI or unrelated business income. The gross revenues from the freight operation (Toppenish, Simcoe & Western Railroad, TSWR) became much bigger than the museum and passenger operations. Operating a modern freight train was not a part of the "nonprofit" purpose even though it enabled the nonprofit purpose. The UBI became much greater that the support from donations, museum admissions and passenger operations. The costs were tremendous at first and money had to be borrowed to keep the operation going. There was no profit, but the IRS looks at the gross revenues. The last year of "nonprofit" operation, the UBI approached $200,000 while the related income was only about $25,000. The IRS would look very unfavorably upon this situation even though the expenses far exceeded the gross income. In the eyes of the IRS the tail was wagging the dog. To comply with IRS rules the TSWR was spun off as a wholly owned for profit company. Then only the declared dividends counted against the 30% support rule. Since only minimal dividends have been declared from the minimal actual profits, the TSWR and its freight revenues did not exceed the 30% rule. As a separate corporation its transactions with the museum had to be at "arms length" and reasonable business decisions. No problem until the TSWR car count reached 2500 cars annually. The TSWR has put virtually all the profits into upgrading the county owned road. Everyone was happy--the BNSF even named the TSWR the shortline of the year for the Northwest because of the great customer relationships and growth of the operation. Then suddenly the other for profit railroads begin to notice. The demand comes that the county needs to offer the other for profit railroads an equal opportunity to bid on the operation! Currently the bid process is underway and the "nonprofit" is hoping that our "for profit" can win the bid and continue its operation. The results of the bids should be known about December 21, 2004.

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