Agenda
1. Roll Call
2. Call to order and Determination of Quorum
3. Reading of the minutes from previous meeting:
www.alphaphifoundation.net/Minutes091406.aspx
Motion to waive minutes of meeting made by John T and seconded by Christian approved by
unanimous consent.
4. Financial review from Merrill Lynch as of March 09,2007
Cash/EMA Account $50,760
Blackrock Global Allocation Fund $30,893
Franklin Templeton (founding) $13,028
MFS Research Fund $19,710
Van Kampen Equity Income Fund $22,328
Total $136,720
Andrew: Are we in appropriate limit of cash on hand?
Damian: Unsure of the rule but probably.
We are up in value.
5. Treasurer’s report - Taxes
Key Points for Foundation Taxes
This is Andrew's personal interpretaion of the tax laws.
We are subject to taxes. Excise tax. IRS requires distribution of at least 5% per year of
funds. Without penalties we owe monies and can get forgiveness for penalties if we show we
are a public charity.
We owe $17,016 in taxes. It is not cummulative and we would owe about $5K every year.
You can do a set aside for the appropriation of a facility. Set asides must be spent within 60
months. Not sure how leinient the IRS will be with this rule. Can protect excise taxes with
set asides but can only do for 60 months. Unclear on what the consecuences are after the
60 months if we have not spent the money.
If you can meet 1/3 of income with donations from broad public support then we will owe no
Excise tax. Can we get separate checks from each individual member of the chapter and
meet the requirements? Andrew believes that we can.
Why are we just finding out now? Can we have any recourse from who is helping us?
The accountant taking care of it is a brother, and the foundation was set up by a brother
years ago. That brother wasn't taking care of it the right way. The accountant taking care of
it knows how to do it the right way and is fixing the problem.
We found out about two years ago when we hired the accountant is when we found out we
had never filed. That is when we modified our Articles and goals to meet 501 c(3) status.
We had to become an entity with the IRS, this triggered a tax event. That tax event is what
resulted in our having to do eleven years of taxes.
We hired Cleve Watson to take care of the problem and keep it from happening in the future.
We found the problem and not the IRS. If we are making a good faith effort then everything
Andrew has found is that the IRS will cut us some slack in order to get up to date on
everything.
If we do not distribute 5% of our average balances then we have to give the IRS 15% of that
5%.
If we get public charity status then we do not owe taxes.
There is a cummulative effect of all undistibuted income. We had $26K of undistributed
income at the end of 2006. We don't want to be based at a corporate rate of 35% of
everything. Our taxes would be higher.
We can either start a set aside or become a public charity. The rule is to activily support
what we have been set up for.
Can we change our focus? We have done that with the change in the articles.
What can we do to change the focus. As a public charity we don't have the 5% distribution
rule. If there is a broad based o fpublic support the IRs doesn't have to charge the Excise
tax. This keeps things like families setting up private charities that only benefit particular
individuals within the family.
If we raised money from both individual checks from students and alumni then we could
become a public charity. We want to ensure that this will qualify as public support.
Brooke was asked that if the brothers would support what we are talking about - she was
unsure at this point.
We will need to get a definitave answer from a tax lawyer.
What is the number we need to come up with for restructuring to get public charity status.
We don't want the student brother's to think we are being predatory and asking them to
come up with the money.
5. House discussions - Fundraising
If we assume that the chapter just writes us a $2k check every year. $4.6k in investment income. Then we need $3.3K to raise from outside the chapter. A public charity is a good option because it let's us do what we want to do. If we have made efforts with an advertising plan than.
Do we need to make a decission now or do we need tax advice before we make a decision?
Andrew thinks we should set up a plan to go after public charity status. The problem is that our tax year end is June 30, 2007. If we wait to make a decision then we may not have time to implement anything. Christian believes we can now start fundraising with what we have now set up.
Is it possible to set up a scholarship based on having a contest to create a marketing plan?
Yes, as long as we set up the criteria. It would be nice if we could get some of the proffessor's involved.
We have a short period of time to find out if we can drum up support. Concerned that we can do what it takes on a yearly basis. There is some concern that we need professional advice before we move on.
We can have a year were we don't make as much as we are supposed to (33%), as long as we are making a good faith effort.
What if we just distibute 5% this year?
Worse case risk, we file our returns and get hit with interest and penalties.
Best case is we get 33% of our money from 17 or more people and the IRS says we owe nothing.
The in between is that we have to pay the 17K and we don't get any interest and penalties. We also start a set aside to not get taxed for our previous investment income. If we hit the 10% for making a good faith effort and we won't get hit with interest and penalties and we are trying to go forward. We are going to ask for no penalties.
We can certainly start raising money. It doesn't hurt us to go after the goal while we are waiting for answers from a tax attorney.
Do we want an attorney to ensure that our approach is correct going forward? Do we need the attorney to validate our approach? We will only get one chance with the IRS. Should we make sure our approach is correct prior to filing a tax return?
We should file our taxes and draft a letter, but have it reviewed prior to sending it out.
What is public support? Who else has done it? Lets get their help to ensure we are doing it right.
Motion to file taxes FY 2006 and prior years moved by John T. second by Greg. Christian Pro -makes us feel better and gets us on the right course, con -we only get one chance to get it right.
Christian moved to Amend the motion to get everything filed by the earliest opportunity after making resonable efforts to get everything reviewed with a second opinion other than Cleve Watson. 2nd by John T.
We've got a tax bill due that Cleve Watson (CPA) prepared. Andrew read letter from Cleve. His cover letter says that nothing may have been done in 2006. However we can certainly go forward to fix everything. We don't need to discuss public verses private in the letter. Can we retroactively ask the IRS to grant us public charity.
Previous question - all approved
Motion to amend passes by unanimous consent.
Any discussion on motion as amended. None. Christian's original intent was to have the letter reviewed.
Motion passes by unanimous consent. Filling includes paying.
6. Chapter relations – Scholarships
Foundation Scholarship Outline
Need Based Application
Merit Based Application
Christian made a motion to create a commitee which includes Andrea and Dan to set up the scholarship and distribute it to the chapter this semester at $500 for a need based and $500 for a merit based. Second by John T.
Andrea and Dan would have authority to do the scholarship.
No more discussion.
Motion passes by unanimous consent.
Next meeting will probably have our next meeting soon.
Announcement on help with suggestions on website.
Thanks from Andrew to
motion to adjourn by christian and 2nd by Greg.
Motion passes by unanimous consent- meeting adjourned at 7:17pm