LEGAL PITFALLS FACING CHAMBERS OF COMMERCE September 28, 2018 J. Patrick Plunkett Attorney at Law (651) 233-7474 jpplunkettlaw@gmail.com 4828-1639-0000

LEGAL STRUCTURE

NONPROFIT VERSUS TAX-EXEMPT Entity Status Under State Law Tax-Exempt Exempt From Certain Taxes

NONPROFIT STATUS Check Minnesota Secretary of State www.sos.state.mn.us Name Address

NONPROFIT STATUS (cont.) Bylaws Members Board of Directors Officers

MEMBERS Description Admission of Members Designated Representative Duties/Rights of Members Expulsion of Members Government Units May Not Be Members

BOARD OF DIRECTORS Number Terms Method of Election Qualifications Removal Vacancies

MEETINGS OF THE BOARD Frequency/Notice Requirements Voting Quorum Written/Electronic Action No Proxies Guests/Minutes

COMMITTEES Method of Appointment Power and Authority Take Action Recommend Action

OFFICERS Chair & Vice-Chair Recommended President and Treasurer Required Method of Election Duties Removal

_________________________________ Day-to-Day Operations LEGAL RELATIONSHIP BOARD Oversight/Planning _________________________________ STAFF Day-to-Day Operations

FUNCTIONAL RELATIONSHIP BOARD STAFF

TAX STRUCTURE

FEDERAL TAX-EXEMPTION 501(c)(6) Chamber 501(c)(3) Chamber Foundation Receive Charitable Contributions Retain Lottery Proceeds Not Support Candidates

STATE TAX-EXEMPTION Sales Taxes Real Estate Taxes

SALES TAX EXEMPTION § 501(c)(3) Foundation Sales Purchases § 501(c)(6) Chamber

REAL ESTATE TAX EXEMPTION Institution of Purely Public Charity Support from Wide-range of Donors Provide Goods or Services at Reduced Price

EMPLOYEES

EMPLOYEES v. CONTRACTORS Advantage to Worker Advantage to Chamber Reporting Requirements IRS Form W-2 (Employees) IRS Form 1099 (Contractors) IRS Form SS-8 (Optional)

OVERTIME REQUIREMENTS Application Federal = 40 Hours/Week (>$500k) State = 48 Hours/Week (<$500k) Annual Compensation of $23,466.00 Executive, Professional, Administrative Comp Time Only in Same Week

PROGRAMS & ACTIVITIES

LOBBYING Not Primary Activity Deduction of Dues Allocable to Lobbying Reporting of Non-Deductible Portion Pick-Up Tax In-House <$2,000 Registration Requirements

CERTIFICATES OF ORIGIN Potential Liability Do Not Pre-Sign Do not Authorize Member to Sign

FUNDING

SPONSORSHIPS Acknowledgment Not Advertising No Call To Action No Product Comparison No Pricing Web-Site Links

AUCTIONS §501(c)(3)/ §501(c)(6) Sponsor Deduction of Donor Equals FMV No Deduction for Services No Deduction for Use of Property Deduction for Buyer Equals FMV above Cost

CHAMBER BUCKS No Expiration Date Unless: Distributed Without Charge Sold Below Face Value for Fundraising Given as Employee Recognition Taxed to Employee Unless: Low FMV and Not Convertible into Cash

RAFFLES Resource: www.gcb.state.mn.us Exempt Permit < $50,000.00 in Prizes Permit Not Required < $1500 if Conducted by Chamber < $5000 if Conducted by Foundation

RAFFLES Use of Net Proceeds By a §501(c)(3) for §501(c)(3) Purposes To a §501(c)(3) for §501(c)(3) Purposes To a §501(c)(4) Festival

RAFFLES (cont) Sale of Tickets Requirements Fixed Price Cash, Check or Debit Card May Not Be Sold via Website May Not Be Sent via U.S. Mail May Not Be Sold After Drawing Begins

RAFFLES (cont) Theatre Style Tickets Sequential Numbers Required List of Prizes Must be Available The Tickets are Sold Only at the Event Must Meet Price Requirements

RAFFLES (cont) Permissible Raffles Wine Pull Cow-a-Bunga Duck Pond Golf Ball Drop Heads or Tails

RAFFLES (cont) Prohibited Raffles Car Through Ice Chicken Bingo Diamond Melt Mouse Hole Puzzle Piece

RAFFLES (cont) House Rules Must be Posted The Method of Selecting Winners A Statement that the Winner need not be Present Payment Methods Record Retention Requirements