We have a rail car we would like to sell, and one of the board members said it was complicated because we were a non profit organization. I do not think that is true, but I need advice from much wiser folks here.
Thank you.

It should be covered in your by laws.

it will make a difference if you are a museum and it's an accessioned object or it it's just a piece of surplus equipment that needs to be disposed of.

Non profit means that all profits can only go to further the goals of the organization. Any profits can not be distributed to the shareholders. The only thing that cannot be sold is those items that the donor specified must stay in the collection. Here in Minnesota the Bremer Foundation owns the Bremer banks. The foundation is a non profit and the make a ton of money on their interest in the banks.
https://en.m.wikipedia.org/wiki/Bremer_Bank
https://en.m.wikipedia.org/wiki/Otto_Bremer_Trust

Mike Nix

Not necessarily in the by-laws.

A museum should have a Collections Policy that is subsidiary to the Mission Statement. The Collections Policy should define what the museum will collect in support of the Mission Statement. The Collections Policy should also define the process of deaccessioning an object in the collection and the process of disposing of the artifact. This should reflect generally accepted ethics of the overall museum community and that of the subgroup (like railroad museums) community.

In general, a gift or trade to another museum is often acceptable practice. If such cannot be arranged then a sale to another institution or to an individual is acceptable. Never should a sale be made to a member of the governing board.

The Mission Statement, a Collections Policy, and other policies such as restoration. display, etc. should be approved by the governing board and shared with the membership, prospective donors and the public.

You should be OK tax-wise on a one-time occasional thing as long as you're not engaging in the business of buying and selling cars and the money goes to further your non-profit mission. Just like consulting lawyers for legal stuff, talk to a CPA so you understand what unrelated business income is.

Definition of unrelated business income: https://www.irs.gov/charities-non-profits/unrelated-business-income-defined

It's not complicated. I believe it will go on your 990 since it is income but it shouldn't be taxable.

All policies shoud also be permanently archived and indexed, and incorporated in the minutes of the meeting(s) at which they were adopted or modified. It's very easy to lose track of the official wording of such documents.

I don't know where your board member is getting his information, but it doesn't sound right to me.

It's a common practice for museums to sell assets and they often use the proceeds to upgrade their collections (think sale of a painting by an art museum.

Assuming, you're carrying this car on you books as a fixed asset, all you have to do is report it on the 990 as a sale of assets and unless there are donor restrictions or your bylaws or articles of incorporation prohibit it, it doesn't matter who you sell it to.

I strongly recommend, as others have stated, you
consult with a CPA proficient in non profit accounting before going any farther with this.

Bob H

It has been my understanding, as a past trustee, that selling an item that had been donated might be considered in poor taste, but is allowable. The “rule” I was taught is that money from a sale of an item that had been donated should be applied to the collection, not just to pay to keep the lights on. I recall the story of an item that had been donated to a well known museum only to be sold some time later. There was a lot of disappointment on the part of the person who donated it and others who knew the item that had been donated. If it’s a case of “thinning the herd” then I would look at donating it to another nonprofit organization with an interest in that item.

I have attached a Collections Policy that I helped write, based loosely on the policy of other organizations. I would suggest you read Section 8. Every museum should have such a policy and should follow it once it is approved by the Board. Unfortunately having a policy and following through on it are two very different challenges but that is another story.

J.R.

One noted instance of that:
The B&O Railroad Museum accepted the donation, from a member, of PRR GG1 4890, acquired from Amtrak as part of their $5,000-a-GG1 sale around 1981. It was acquired to preserve a bit of PRR history at a museum that had other examples of non-B&O-family equipment, such as the Ma & Pa baggage-mail car. Local fans, including the NRHS Chapter, raised funds for a repaint into PRR big-keystone-and-broadstripe scheme, and as matters transpired it became the only PRR electric loco saved in a city/town on the Northeast Corridor (the ones in New Jerset are now close, but not quite there).

A change in management (from railroad to independent) and mission statement (to almost exclusively "B&O/C&O/WM only") rendered the GG1 "surplus" VERY shortly after that donor died, leaving the Museum to sell/transfer/whatever the 4890 to the National Railway Museum in Green Bay. Now, it's nicely restored there and indoors under cover--which I'm sure it never would have been in Baltimore. But I still encounter local fans that hold a hard grudge against the Museum for that move, fans that would be eager volunteers or donors otherwise.

It's not just the accountants or tax folks you may have to worry about.

Something else that helps perceptions (and imho, morality):

Put codicils into the terms of sale that explicitly forbid scrapping or even 'destructive' modification of the artifact, or that compel right-of-first-refusal sale to other nonprofits or museums. How 'binding' these can be made is of course an issue for lawyers; perhaps there is an extended form of contract with acceptable but defined and agreed remedies for 'breach'.
I have seen contracts that contain this kind of language, and it would be interesting to know what is, and isn't, demonstrated to be effective.

Your standard deed of gift should include language stating that the gift is free and clear and the institution can do what it likes with the donated object. A local museum, early on, was lumbered with many duplicate objects because the donners required they be kept forever.
This was during the "we'll take anything" faze. As the curator later said "How many straight razors do you need?"

As to the original question, you should be safe selling the car as long as the money is properly spent and accounted for.

The best you could hope for would be monetary damages. A clause like that generally is only enforceable after the fact.

By this do you assume that the 4876 is not "saved"?

Steve

I wasn't going to get into that, but since it was brought up, I was one of the driving forces in bringing 4876 to the B&O Museum, and spent years watching entropy set in in Mt. Claire "A-Yard" while it waited for a restoration that never came. So no it's not "saved", in any sense other than it hasn't been scrapped (yet). I wish I had saved my money and just left it with the URHSofNJ. This is what happens when there is not a formal written agreement about what is done with an item, and personnel and the mission of the museum drastically changes.