Lions and Kiwanis and Rotary, Oh My!

Frequently asked questions about becoming a 501(c)(3) foundation


Why Should Our Club Become a 501(c)(3) foundation?


I have recently had the pleasure of both incorporating and applying for 501(c)(3) non-profit status for a New York Lions and a New York Kiwanis Club.  One club had been in existence for more than 50 years but had just recently chosen to apply for not-for-profit status. The Club realized that in order to attract large donations and grants, it would need to create a foundation and apply for 501(c)(3) status.

But Our Club Already is a Non-Profit, Isn’t it?

When a New York Lions or Kiwanis or Rotary Club receives its charter from the parent organization, it is granted 501(c)(4) status under the parent clubs’ group exemption.  All 501(c)(4) organizations are also non-profits.


What is the difference between a 501(c)(3) and a 501(c)(4)?


Both kinds of 501(c) entities are tax exempt, which means that they are exempt from paying federal and New York (and even local Long Island) taxes.  However, 501(C)(4) organizations do not allow for tax deductible donations.  When people give money to charity, while they love being charitable, they also love taking the donations as deductions on their tax returns.  Unless your Kiwanis or Rotary or Lions Club has applied for 501(c)(3) status, donors cannot deduct their donations to your organization.


What is the next step?


Once a New York Kiwanis or Lions or Rotary Club decides to establish its club as a charitable entity, it must do so by creating a foundation, then incorporating in New York as a not-for-profit corporation, then applying to the IRS for a determination letter by filing Form 1023.




New York Religious Corporations Law

It makes sense for religious organizations such as churches, temples, synagogues and other religious nonprofits to form corporations. Incorporating enables the religious organization to enjoy the benefits of limited liability and other attributes of corporate entities. In New York, religious corporations are controlled by both the Religious Corporations Law (RCL) and the New York Not-for-Profit Corporations Law (NPL).  This interplay between the two laws can be complex.  Any church or synagogue considering incorporating should consult an attorney familiar with both the RCL and the NPL.

Because of the separation of church and state, the requirements for becoming a religious corporation can be less onerous than other corporation law.  The New York Religious Corporation Law has general statutes that apply to all religious corporations and numerous denomination-specific articles.

For example, the articles of incorporation for religious organizations that maintain a place of worship are filed in the county with the county clerk where the religious organization is located, instead of with the Secretary of State as are other corporations.

Churches and other religious corporations who wish to dissolve do not have to get the attorney general’s permission, unlike other nonprofits.  Although religious corporations do need to get the attorney general’s permission to sell property, if that sale is pursuant to dissolution, only the Supreme Court needs to give permission.   However, if an issue is not addressed in the RCL, then the New York Not-for-Profit law must be followed.

Because the Religious Corporations Law is such an unknown part of New York non-profit law, affecting how to sell property and dissolve the church, you should contact an attorney knowledgeable in this law before forming or dissolving a church or other religious corporation, or selling property.

Long Island 501(c)(3) Not-for-Profit Formation

What is a nonprofit organization?

Terms: Some confusion exists because of the different names for these organizations: Not-for-profit, non-profit, nonprofit.   These terms are used interchangeably in the charitable world.

Are nonprofits the same as 501(c)(3) organization?

While almost every 501(c)(3) organization is a nonprofit, not every nonprofit has 501(c)(3)status.  A nonprofit organization such as a Lions, Kiwanis or Rotary Club is usually a 501(c)(4) organization operated exclusively for the promotion of social welfare. This means that any donations received by the club are income tax free, but donors cannot deduct their donations on their tax returns.

Why apply for 501(c)(3) status?

Any organization hoping to receive large donations, or to apply for grants should apply for 501(c)(3) status.  Organizations expecting annual donations in excess of $5,000 are required to apply.

Are there any other benefits?

In New York, a 501(c)(3) organization can be exempt for sales tax on purchases, franchise tax and property taxes.  Additionally, special nonprofit bulk rate postage discounts are available for qualifying nonprofit organizations.

Why use a local lawyer?

Online services do not offer personalized mission statements and then charge additional fees for registering with the New York Attorney General, another requirement.  They frequently charge additional fees for applying for separate EIN numbers and for applying for New York sales and franchise tax exemptions.

Even more importantly, establishing a relationship with a New York attorney gives you the ability to ask questions about running the organization.  Some examples of this are whether an organization can use proxies for voting at Board or member meetings, what is a quorum, what are the duties of the Board as opposed to the membership, can voting take place by email.

About Ellen Victor, Esq.

Ellen most recently successfully formed the Merrick Lions Club Foundation, Inc., a 501(c)(3) organization currently fundraising for the Purple Heart Pups.  PHP was established to raise money to help disabled veterans lead successful and independent lives by raising the money needed to provide them with access to service dogs and other supportive programs.