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  1. #1
    Join Date
    Nov 2016
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    2

    Default Can a 501(C)(3) Organization Have a Message Board for Private Sales by the Public

    My question involves business law in the state of: New York

    Are 501c3's able to have a message board on their website in which third party people
    can buy and sell items related to the 501c3's mission?

    Example. I have a 501c3 dedicated to preserving the history of glass marbles. Can I have a message board on the site where third party people (the general public) can trade marbles, buy marbles and sell from one another outside the 501c3 involvement.

    I assume the BOD would not be allowed to sell marbles for personal gain on the 501c3's site..?

    Thanks,
    Marble collector.

  2. #2
    Join Date
    Sep 2010
    Posts
    19,901

    Default Re: Legal Uses of a 501c3 Not of Profit Message Board

    I don't think there's any problem here at all. The contributions to the 501(c)(3) aren't really being used for personal gain. The fact that a bulletin board on the org's site was used to conduct a private transaction is a little inconsequential.

  3. #3
    Join Date
    Oct 2014
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    8,238

    Default Re: Can a 501(C)(3) Organization Have a Message Board for Private Sales by the Public

    As with most anything, the details of how the site operated matters. Organizations that are tax exempt under Internal Revenue Code section 501(c)(3) have to ensure that their activities do not result in a private benefit to the individuals operating the organization and that the activities of the organization are primarily for an exempt purpose. If the organization simply provides a space for marble enthusiasts to discuss and trade glass marbles among themselves and from which the organization does not generate any revenue (other than asking for donations to the organization) it’s probably fine. I cannot see how doing just that would provide any significant private benefit (as that term is used in tax law) to the board members or officers of the organization.

  4. #4
    Join Date
    Oct 2006
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    16,474

    Default Re: Can a 501(C)(3) Organization Have a Message Board for Private Sales by the Public

    I agree with the previous responses. The organization could be viewed like a club of sorts.

  5. #5
    Join Date
    Mar 2013
    Posts
    18,340

    Default Re: Can a 501(C)(3) Organization Have a Message Board for Private Sales by the Public

    Quote Quoting Taxing Matters
    View Post

    If the organization simply provides a space for marble enthusiasts to discuss and trade glass marbles among themselves and from which the organization does not generate any revenue (other than asking for donations to the organization) it’s probably fine. I cannot see how doing just that would provide any significant private benefit (as that term is used in tax law) to the board members or officers of the organization.
    Couldn't the organization engage in revenue producing activity if that revenue is used solely for the support of the organization and the furtherance of its purpose?

  6. #6
    Join Date
    Sep 2010
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    19,901

    Default Re: Can a 501(C)(3) Organization Have a Message Board for Private Sales by the Public

    Most likely so. I actually am actually a board member (and the webmaster) of a 501(c)(3) organization with a attached internet forum. The operation of the classified section of our forum is so inconsequential to the overall funding and mission of our activity that I'm not going to lose sleep if people make a profit (either personal or business) on a sale there. In fact, we list information on commerical activities as well as accepting advertising from commercial entities. Yes, we do have a lawyer to advise us on this thing. Most 501(c)(3)'s should likely have one as well.

  7. #7
    Join Date
    Nov 2016
    Posts
    2

    Default Re: Can a 501(C)(3) Organization Have a Message Board for Private Sales by the Public

    Quote Quoting flyingron
    View Post
    Most likely so. I actually am actually a board member (and the webmaster) of a 501(c)(3) organization with a attached internet forum. The operation of the classified section of our forum is so inconsequential to the overall funding and mission of our activity that I'm not going to lose sleep if people make a profit (either personal or business) on a sale there. In fact, we list information on commerical activities as well as accepting advertising from commercial entities. Yes, we do have a lawyer to advise us on this thing. Most 501(c)(3)'s should likely have one as well.

    Thanks everyone… some other things to add… to clarify things


    1. The organisation is run by a BoD of unpaid volunteers. Does this matter?
    2. Some potential website users/marble buyers and sellers may or may not have a membership level in the organization. We have a "club like" paid membership program.
    3. (Question) Would members of our BOD be allowed to buy or sell their own Marbles on this forum or advertise their ebay auctions without conflicting with the tax law?
    4. We plan to use the website message board for club fundraising efforts as well…

    I'd appreciate your opinion with this… We have a large membership and adding this message board feature to the site will dramatically increase site usage.

    Thanks again,
    Marbles

  8. #8
    Join Date
    Oct 2014
    Posts
    8,238

    Default Re: Can a 501(C)(3) Organization Have a Message Board for Private Sales by the Public

    Quote Quoting Marbles123
    View Post
    Thanks everyone… some other things to add… to clarify things

    1. The organisation is run by a BoD of unpaid volunteers. Does this matter?
    Whether they are paid or unpaid does not matter for this.


    Quote Quoting Marbles123
    View Post
    3. (Question) Would members of our BOD be allowed to buy or sell their own Marbles on this forum or advertise their ebay auctions without conflicting with the tax law?
    They should be able to do that like any other user of the site. That is not providing the directors with a private benefit from the organization.

    Quote Quoting Marbles123
    View Post
    4. We plan to use the website message board for club fundraising efforts as well…
    Using the site to help promote permitted fundraising should not cause the organization any problems.

    Quote Quoting Marbles123
    View Post
    I'd appreciate your opinion with this… We have a large membership and adding this message board feature to the site will dramatically increase site usage.
    If your organization is fairly large and this will have a significant impact, I recommend you consult a tax attorney who practices in the area of exempt organizations to review the exact details of what you plan to do and get advice as to whether any of it poses a problem. The details do matter, and we don’t have that here. Far better for the organization to spend a little in legal fees now to get it right than spend a whole lot more later if turns out the organization screwed something up. While the general description of what you want to do sounds ok, without the details I could not tell you if there is anything that might be a problem.

  9. #9
    Join Date
    Oct 2014
    Posts
    8,238

    Default Re: Can a 501(C)(3) Organization Have a Message Board for Private Sales by the Public

    Quote Quoting adjusterjack
    View Post
    Couldn't the organization engage in revenue producing activity if that revenue is used solely for the support of the organization and the furtherance of its purpose?
    Yes, but the rules for that are a bit complex. Oversimplifying it a lot, business activity that furthers the exempt purpose of the organization and does not compete directly with for profit enterprises is generally ok. A charitable hospital is a great example. They charge patients fees for the medical services provided based on the patient’s ability to pay, giving free or significantly below cost care to the poor. That furthers their charitable purpose of making healthcare services available to the poor. So while they do charge fees to patients, they operate in a manner distinctly different from that of the for profit hospital and are not trying to directly compete with the for profit hospital. But they have to be careful how they operate so that they do not stray across the line into impermissible activity that might jeopardize their exempt status. A lot of the case law in this area does indeed involve hospitals and it can get complex.

    A § 501(c)(3) organization may also have some amount of unrelated business income, but if that unrelated business income is too large that becomes a problem because these organizations are supposed to derive most of their revenue from public donations and their exempt activities. Note that the unrelated business income of these organizations is subject to income tax, known as the unrelated business income tax (UBIT). A good example of unrelated business income here are fees earned by college alumni associations on sponsored credit cards they issue in cooperation with a financial institution. Those fees are not related to their exempt purpose, so they pay UBIT on it, but the income does not interfere with their exempt mission and is not so large a part of their income as to present a problem.

    There are ways to structure the organization’s activities to deal with these issues without jeopardizing the organization’s exempt status. If a charity wants to venture business activity, it would be well advised to seek advice from a tax attorney who practices in the area of exempt organizations to ensure it won’t be a problem.

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