Using the SIM Foundation as a 501(c)(3) Pass-through
One of the SIM Foundations purposes is to provide a vehicle for chapters to be able to accept charitable donations. The foundation is dedicated to keeping the cost of doing this minimized for all the chapters and will not take any part of the monies collected. This allows 100% of the funds contributed to be passed through the Foundation. This also allows the chapters to decide how and when their charitable contributions will be distributed. Please look at the FAQ below to help you understand the requirements for using this pass-through.
Why would my chapter use the Foundation for this purpose?
If a vendor or person donates money to your chapter, they can be presented with two options; charitable donation or marketing expense. Charitable donations must go directly to a 501(c)(3) to be legally deductible and have several conditions that they have to adhere to. If your chapter accepts the donations as a “Marketing expense” the donor can still deduct this as a cost of doing business, but cannot deduct it as a charitable contribution. Unless your chapter has a 501(c)(3) set up, they cannot accept charitable contributions, they can only allow companies to write off contributions as a marketing expense. The SIM Foundation is a 501(c)(3) and can accept charitable donations on behalf of your chapter and allow the donor to claim a charitable donation.
Who can the SIM Foundation distribute funds to?
We can distribute funds to any 501(c)(3) organization on behalf of your chapter. Typically, all universities and most organizations set up for charitable donations have a 501(c)(3). This applies to money from the SIM Foundation as well as any money that you collect as a charitable contribution. Money cannot be given directly to any individual or any non-charitable group. Any funds collected as a charitable donation must go to a 501(c)(3).
Do I need a local license or permit to collect charitable contributions before and during my event?
If you are collecting charitable donations using the foundation, the foundation will most likely need a permit from your state (Chapters will be required to pay the registration/renewal fees). Each state has different laws about this and you will need to check your state’s website (or see fee schedule) for the requirements, there are only a handful of states that do not require registration. The SIM foundation requires you to use a third party company to assist with registrations to ensure that all proper guidelines are followed. At this time the Foundation has approved Labyrinth, Inc. (https://labyrinthinc.com) as the required charity registration company. The cost to register is $159 (Labyrinth fee) as well as any costs the state charges. In addition, (in the following year), chapters will be required to either Renew or cancel the registration for the following year (No charge for cancelation, Renewal fees are a $159 charge by Labyrinth for the state renewal fee). See fee Schedule.
How do I get started?
Prior to using the foundation, the chapter must contact the SIM Foundation and provide an outline of the chapter’s plans, and obtain SIM Foundation board approval. The SIM Foundation’s role will be to ensure that we adhere to government regulations for fund distributions. Information the foundation will need includes estimated number of transactions coming into the foundation, type of event and whom the final recipient(s) will be. The next step requires the SIM Foundation to register as a charity in your state so that tax deductible donations can be received by the foundation.
How does our Charity Registration Company work?
The SIM Foundation uses Labyrinth, Inc. (https://labyrinthinc.com) to register with the state, allowing the foundation to collect tax deductible donations in your state. Registration is good for 1 year and the chapter must either cancel or renew registrations for the subsequent years. The chapter will be responsible to for the costs of registration/renewals and the service fee paid to Labyrinth to perform the transaction. The SIM Foundation does to allow you to take tax free donations for the SIM Foundation on your behalf. Once your chapter has expressed an interest in using the Foundation the following will occur:
- The SIM Foundation will then reach out to Labyrinth Inc. to get pricing on the initial registration and the yearly renewal cost.
- All fees will be presented back to your chapter for approval.
- Once your chapter approves the fees, the SIM Foundation will register in the chapter’s state.
- All fees incurred will be charged back to your chapter and deducted via ACH.
- Renewals will happen automatically unless your chapter notifies the SIM Foundation.
If I run an event and collect charitable donations through the foundation, can I deduct the cost of the event from the collected funds prior to distributing the funds to the final recipient?
The government provides a mechanism to do this for 501(c)(3) organizations, but the Foundation does not have a structure in place for this yet. Since your event will likely have some vendors contributing funds directly to the chapter, it is recommended that you use these funds for events costs and 100 percent of the charitable donations to the SIM Foundation can then be provided to the final recipient organization.
What happens if a corporation contributes fund to our chapter as a marketing expense?
When a company chooses to donate money to your chapter, they may want to choose to designate it as a marketing expense vs a charitable donation. If they choose to designate it as a marketing expense, it can be handled by your chapter 1 of 2 ways;
- It can go to the Foundation, which will require that it be distributed to a qualified 501(c)(3).
- It can go directly to your chapter which will give you the ability to spend that money in any way you choose
I have more questions, where do I direct them?
Please send your questions to our current Foundation chair Eric Gorham egorham@simnet.org or Sandi Phillips sphillips@simnet.org on the Foundation board.