The Supporting Organization:
Incorporation And Taxation
Forming a supporting organization for channeling done by you or in
your group is a frequent response to society’s demand for
organization, given that your work stabilizes and is productive.
Your choices include the legally taxable corporation and the
non-legal, unofficial group. The latter option has the advantage of
making it very easy to slide through the system.
Until very recently
there used to be a disadvantage to this choice in that contributions
to unofficial groups, no matter how uplifting their inspiration, had
no tax advantage. Beginning in 1987 the tax advantage is greatly
lessened because of the changes in Schedule A, Itemized Deductions.
This makes running your support group unofficially a more feasible
alternative, though you still should keep books, as you will be
personally responsible for declaring income.
If you wish to have freedom to do whatever is legal for any
corporation to do, you may be interested in forming a legally
taxable corporation and paying taxes using corporate tax forms. This
would make the business tax-costly, but you could use any asset as
you wish, within reason, whereas assets of a non-profit corporation
can never become private property.
If one’s group has an eleemosynary purpose, it does seem worth the
trouble to attempt to get tax recognition of your charitable status.
It certainly is some trouble. The IRS needs to be very careful in
granting tax letters to 501(c)(3) organizations since the benefits
of such standing are many, including not just reprieve from income
tax but from sales tax as well, plus savings on mailing rates.
If you choose to incorporate, it is well to seek the advice of a
lawyer. This is not to say that a well-intentioned, persistent and
patient person cannot eventually learn enough to act as an attorney
for the self and create one’s own Articles of Incorporation, and
then go about the process of applying to the Internal Revenue
Service for tax-exempt status. It can be done; I have done it,
although not with the formation of the Rock Creek Research &
Development Labs., our group’s supporting corporation, which has the
status of a public charity (The organization whose articles I set
up, Eftspan, also obtained public charity status in 1975).
a lot to know about writing Articles of Incorporation that is not
available in any concise form, due to the complexities of state and
national laws. Each state has requirements for incorporation, and if
you are attempting to write your own Articles, the best beginning is
a look at as many other Articles of Incorporation as you can coax
other charities to divulge. Since it’s illegal to give legal advice
to another and since each state has peculiar characteristics, it is
impossible for me to aid you if you wish to be your own attorney,
except to tell you to be very cautious and careful about what you
Copy the preferred liquidations clauses word for word, as
there are tax code numbers and legal language that could not
possibly be created by any amount of psychic intuition or even
common sense. Do the same with the closing notary public statement,
making sure that the requirements for your state have been
fulfilled, and do not consider your work done until your
organization’s officers have sat down with a notary public and
completed a notarized signing of the document.
Do not think for a
minute that you may take two out of three officers for one signing
and the third for a separate one—all signatures must be gotten at
the same sitting.
You really are better off if you can possibly afford to find a
sympathetic and interested person who is also a lawyer. For one who
has been through a lawyer’s training, this document is not difficult
to frame, and you would be saving yourself a good deal of
frustration, as I understand that my experience of having to do
everything over at least twice was, if anything, one of the more
pleasant experiences available to those who attempt to joust with
the world of documents, contracts and government agencies.
my experience with the The Eftspan Foundation, which began in 1974
as a light center near St. Francis, KY., and is at this point more
of a wildlife refuge than an active light center, netted me four
gloriously beautiful trips through the countryside to our state
Capitol, and many an hour of intriguing and fascinating conversation
with those I met in the many offices of state government and over
the phone with the IRS officers. I enjoyed myself very much
throughout the experience. However, for a lawyer, the four trips
would have been one, and the frustration level would have been
Whether you become, when you achieve tax-exempt status, a private
foundation or a public charity, you will be reporting on Internal
Revenue Service Form 990, which, by the way, you have to request
from the IRS each year if you have received over a certain amount of
donations. That amount is now $25,000 but could change at any time.
Actually, the IRS does not ask small organizations with receipts
under $25,000 to file 990s, perhaps in an effort to trim away
unnecessary paperwork in the light of progressively expensive costs
of doing business.
However, we have, as a part of the metaphysical
principle of absolute honesty and clarity in all relationships,
filed one anyway, even in those years when our receipts were under
$25,000. Indeed, even if you do not send the form in to the
government, it is not a bad idea to fill it out at the end of the
year and put it away in a permanent file so that if there is any
question in the future, the pertinent facts will be as easy as
possible to retrieve. With the advent of computers, this kind of
care in record-keeping is far easier to come by, with software to
create a tax document each year to be placed in your organization’s
Your basic 501(c)(3) requirement is that monies never return to
personal or private use. If you cannot swallow that simple
requirement, then you need to stay taxable, whether as an individual
or as a corporation. I have known people who are able to put close
to 95% of all personal expenditures into the context of one
non-profit project or another which is on-going in an eleemosynary
organization and, therefore, I know it is possible.
However, I don’t
recommend it for you at all because any gain that you may see due to
the relief from personal income taxes is eaten up not only by the
metaphysically questionable nature of such account-juggling but also
by the amount of time that you must go through in the inevitable IRS
questioning. Honesty, at least in my opinion, is always the best
You will need books, a good stout ledger or series of duplicated
floppy disc files which will contain certain information which may
well be required by the IRS for one reason or another.
list of donations received by contributor, date, and exact amount.
ledgers for keeping track of assets and liabilities, income and
expenses and balance sheets.
car log, if the organization has an automobile
appropriate tax forms (990 for a charitable institution).
Archives should include:
In your bookkeeping, the double entry method seems to be necessary
only if you have a more active cash flow than we have ever
experienced. If you have a computer, your way of entering data may
end up being double entry bookkeeping because of your software, and
as long as it is that simple, that’s fine, but to keep books that
elaborate for a small organization seems unnecessary if it’s any
You do need some good, sound books, however. Income
and expenses can be kept by category. It is by far more productive
to keep expenses in the same categories as does the Internal Revenue
Those categories include as expenses:
grants and allocations.
specific assistance to individuals.
benefits paid to or for members.
compensation of officers, members, directors, etc.
other salaries and wages.
other employee benefits.
professional fund-raising fees.
postage and shipping.
equipment rental and maintenance.
printing and publication.
conferences, conventions and meetings.
depreciation depletion, etc.
Other expenses that we have experienced in the past are: auto
expenses, Xerox copying, advertising, research materials,
construction, cost of copyrights, safety deposit box rent and
IRS breaks down income into:
program service revenue.
sale of assets.
It figures the cost of goods as any other business does, taking
gross sales minus the cost of goods equaling profit made. Income
categories that show these sub-categories, if applicable, would be
well to keep as it will save you trouble at tax time.
The IRS loves balance sheets. There is something warm, fuzzy and
incompetent about my mind which I never notice until I look at a
balance sheet. One likes to think of one’s self as analytical,
capable, competent and at least normally able to interpret the
written word; balance sheets convince me that I have none of the
above virtues but, rather, a head full of cotton wool. However, my
personal feelings notwithstanding, a balance sheet is not difficult
to fill out, if you have kept the records well and are willing to
spend some time talking with the IRS about what some of their
phrases might mean.
I’ve worked with several different cohorts on
filling out Form 990, part five, the IRS balance sheet, and not one
of those with whom I have worked has been able to get through the
entire thing without calling to ask questions of the IRS. The same
question has never been asked twice! Not knowing what each of your
relative weak points might be, I will leave you to it!
You will be receiving a government questionnaire having to do with
the purposes of the organization. Our federal government allows for
a total of three purposes for an organization and I recommend to you
strongly that even if you have only one purpose that you know of,
you put down as broad and varied a set of three purposes as you can
without being dishonest. The reason for this is the uncertainty of
personnel and energy over a long period of time.
Had I, for
instance, filled out the Eftspan Foundation’s purposes as that of
research and offering a spiritual or metaphysical center, and left
out wildlife preservation, the Eftspan Foundation now would be
obliged to report to the government that it was no longer active.
This would mean that the land that so many people contributed to
would be gone, unless the organization to which Eftspan had decided
to donate the land had agreed to allow all Eftspan members free
access to it.
Because we had the land, the thinking of the Eftspan
officers was that we might as well be a wildlife preserve since we
all felt that this was an extension of being a light center, with
love extended to animals and plants as well as humans. Try to think
in terms of the worst scenario when setting up your Articles of
Incorporation and stating your purposes.
Also to be avoided in the Articles of Incorporation is being
restrictive in the bylaws. Three main functions need to be covered
in the by-laws: officers, meetings and members. If you state that
your officers will be three, and then later you discover that you
wish to add another person to the Board, or perhaps two, you must
then notify the IRS and your state of the changes in your bylaws,
which means that you must come under the scrutiny of someone who has
not previously been familiar with your organization and may have had
very disheartening dealings with another charitable organization
which was abusing its tax-exempt status.
Therefore, write about your
Board in as general a language as possible. For instance, if you
feel that three is the proper number of officers for your
corporation but you would consider any number possible up to nine,
write it that way. Write to the limits of your desired room for
expansion or contraction.
Similarly, with members, it is least trouble to have no members and
simply to take donations. Each thing that you say about requirements
for members limits more and more the scope of your organization. It
is only necessary to have an annual meeting.
Even if you wish to
have weekly meetings, it would be better to write the Articles of
Incorporation stating only the legal necessity of an annual meeting,
the legal minimum for an organization, in order that if you stopped
having weekly meetings, deciding to have fortnightly meetings, for
instance, you would not have to come under the scrutiny of IRS and
state officials over something relatively minor. Use your own
judgment, and try to think like a lawyer if you are attempting to be
Realize that the less restrictive language is, legally
speaking, the more freedom you will have within the legal system and
try to give yourself as much freedom as you can.
This is not to suggest in any way that you put yourself forward to
do anything that is not aboveboard. But you will find—and probably
have already found as a private person—that there are situations
which one gets into in dealing with an organization of any kind and
particularly with the IRS where, with all the good will in the world
and with no dishonesty whatsoever, you can and will find yourself in
Careful thinking and good record-keeping will be
your allies in this area, which is perhaps more alien to a channel
than to some people, since there is not a lot of room in a balance
sheet for metaphysics.
Do try to keep your sense of humor because the IRS people are not
big, bad guys. The tax laws do a very large favor for organizations
with nonprofit motives and purposes such as yours, and they are to
be appreciated, not cursed. It is easier to do that from afar than
when one is in the middle of qualifying for a favorable tax
determination or an audit, but try to keep your perspective no
The people there have been uniformly caring and
supportive throughout my experience with nonprofit corporations.
When you must call the IRS and talk to them about your tax letter or
your Form 990—and if you organize, you will make those calls—be sure
and pick up the phone expecting to talk to a friend.
There are some things to avoid in setting up your organization. One
of them is any accounting method except “cash.” Accrual is the other
fairly widely used method of accounting, and it does require double
entry bookkeeping and considerably more complex record-keeping. For
a nonprofit organization, especially a small one, it’s just not
necessary. In fact any overly complex bookkeeping system is to be
avoided. But be sure that you can pull out, by some method of
record-keeping, the amount that any one contributor has given within
any calendar year as that information is sometimes helpful to the
If you are selling pamphlets, books or other publications and will
have an inventory, try to think ahead and predict when you will have
the least amount of inventory. Set up your tax year to coincide with
that period so that your inventory-taking will be as easy as
possible. Often, one cannot predict one’s future inventory with any
accuracy, but there are some who publish once a year or periodically
and if you fall into that category, do yourself a favor!
Try to avoid simple bad judgment in spending. It is tempting
sometimes to want to pay someone who has done so much for an
organization, but if you have only enough cash to cover the expenses
that you already have, you really can’t afford to be paying yourself
or anyone else a salary. If someone comes to you with a scheme for
getting a lot of contributions for your organization, think
carefully about what the ad campaign would cost the organization in
relation to the amount of contributions it would generate. Consider,
also, the metaphysical appropriateness of the ad campaign.
will pick up on salaries and benefits and on the cost of the
campaign. There are whole schedules in the Form 990 having to do
with these points. There are some questions there that you want to
be able to answer “No” to, unless you have a great deal of money
coming in and can truly justify the amounts spent on salary and ad
Although I have talked with government agencies about our research
in years past, the government has never funded any of our research,
nor do I think it likely that they would offer to fund yours!
However, it does seem sensible to caution you about having any
dealings whatsoever with the government, or, indeed, with any
politically-motivated action, especially lobbying. There are many
questions on Form 990 having to do with involvement with things
political. The practice of channeling is profoundly nonpolitical and
it would seem to me best to stay out of that fascinating earthly
arena of action.
Lastly, avoid giving anything away if it has salvage value. Junk
can, of course, be given to anyone who will take it off, but if it
is useful and functional, and you want it, buy it from the
organization. Don’t just claim it.
For those of you just now beginning to consider writing your
Articles of Incorporation, the present record-keeping necessity is
great. Most organizations miss keeping proper records at first.
Unfortunately, it is your first couple of years’ records that the
IRS will use to determine your tax status. And that precious tax
status letter will be the result of your work at the beginning.
records of donors and of all:
membership fees (if you have decided to have members).
business income (unrelated to your purposes as an organization,
generated by a money-making project).
taxes levied on your behalf (if you are a school).
services of facilities provided by the government (such as a place
and especially a careful record of all expenses (see above
They will be wanting to find out how much was given by large
contributors for each year as well as how much was given in total
for each year. Consequently, a card catalogue filing system was the
answer that we have come up with, pre-computer, to the question “How
will we know how much each person has given?” The advent of the
personal computer age means that this information can be kept on
disks and retrieved and added to as needed, a vast improvement in
Make sure that you do keep these records, one way or another, and
good luck to you as you embark on what may seem at times to be an
impossible scheme: the corralling of physical details to support
metaphysical seeking. It is an unlikely thing for a mystic or a
channel to be doing. Yet it needs to be done.
If you are an
instrument but find yourself incapable of paper work, I urge you to
find yourself some help, for you will find, as unlikely as the
combination of paper and metaphysics seems, that the world of paper
is not actually out to get the psychic but rather wants to do
everything it can to help charitable and lofty causes.
thinking positively, and walk away from a desk that has grown too
crowded with a day full of frustration. Books do have the advantage
of being utterly nonpsychic. The mistake that you cannot find today
will probably show up the next time that you show up at your desk.
When in doubt, check your energy level.
If you still have plenty,
try to remember the last joke that you heard, and plunge back in. If
you are running low on energy, patience and smiles, try to remember
the last joke that you heard, find yourself unable to remember it,
and go do something else that is wonderfully nourishing to heart and
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