Misunderstanding Fannish Non-Profits

[kevin_standlee]

Those of you on the SMOFS list will know what I'm talking about here. I'm not going to name names, because it really doesn't matter; if one person in fandom believes what I'm about to describe, then there are probably others -- possibly quite a few. Incidentally, the discussion behind the cut below is primarily based on US conditions. Legal and organizational conditions in other countries, including Canada and the UK, are somewhat different. Trying to include every variation is nearly impossible.

SMOFS has been in the throes of a seemingly-interminable discussion, the core of which is the unresolvable issue of "what is a fan." (It's unresolvable IMO because "fan" means different things to different people; it's like asking "what color is truth?" or "how loud is beauty?") As part of this discussion, one person chastised us conrunners for not donating more proceeds from our conventions to things like libraries or public charities of some sort. She called the usual practice of most ongoing conventions with which I'm familiar (if you have a surplus, you use it to improve the next convention) "putting it into the party jar." She called conventions "parties you hold for an author." She made comparisons to fundraisers she's volunteered on of various sorts. The implication I got was that she believed that since (at least in the USA), most fannish groups running conventions are "charities," then everything we do should really a fundraiser for some sort of charitable function.

I was astonished. This completely misses the point of what fannish non-profits are for.

To simplify here, I'm limiting this to groups that are either formally recognized as 501(c)(3) non-profit, tax-exempt groups or probably would be if they went to the trouble of filing the application. There are other types of non-profit/tax-exempt groups, and the answers are similar for them, but I'm trying to not get side-tracked.

While we commonly call 501(c)(3) groups "charities," but in fact the full classification (as listed in the Exemption Requirements document on the IRS web site) is charitable, religious, educational, scientific, literary, and some other things that aren't directly relevant here. In essence, "charity" in the legal sense means something more than the narrow sense of "give money to the poor" or something like that

Fannish organizations aren't usually "charities" in the narrow sense, but "educational and literary societies." That doesn't mean they are any better or worse than narrowly-defined charities, and for tax purposes, they're the same sort of entity. For such groups, the purpose of their organization may be to run science fiction conventions. Their purpose is not "to raise funds for charity by organizing science fiction conventions." In fact, if they drafted their bylaws very narrowly and left out the "do anything a 501(c)(3) group is allowed to do" escape clause, it's vaguely possible that donating surplus funds from their convention to (say) a library might actually violate their charter and get them in trouble! In other words, the highest and best use to which a fannish 501(c)(3) organized to run SF conventions can put its operational surplus is (surprise!) running SF conventions!

I got the strong sense that the person in question didn't think that the educational-literary aspects of SF conventions were really important, and that we were just engaging in some tax dodge or taking advantage of a loophole in the rules to run a party for ourselves. This is very frustrating. While we sometimes may describe Worldcons as "parties for five thousand of our closest friends," you shouldn't take things quite that literally!

Here's another thing: If your fannish non-profit goes out and donates its surplus to some (narrowly-defined) charity or another, without having said up-front that you intend to do so, even if it's legal (it probably is unless you were stupid when you drafted your bylaws), it may tick people off when they hear about it. Some people who came to your event (and paid their share) may well complain, "I paid for an SF convention; I didn't want my money used to support Charity ZYX."

As a matter of public policy, the US federal and state governments give an indirect subsidy to various cultural-improvement organizations (and that's what most fannish conventions are, honest!) by exempting them from taxation and allowing donations to them to be deducted from individual tax returns. There's nothing dishonest about taking advantage of it. It's not a "tax dodge" or a loophole. How could someone go about organizing fannish events in the USA thinking that unless we give all our money to "real" charities, we're being deceitful?

If people who are (more or less) inside the fannish community think things like this, I can only imagine what a lot of people outside it must think.

Comments

[kalimac.livejournal.com]

I don't recall ever having heard the word "charities" used as a synonym for "501(c)(3) groups". It hadn't occurred to me that anybody would think we're fund-raising charities. And if they do, I'd have guessed that they'd gotten hold of the wrong end of the stick by encountering discussions of charitable disposal of surplus funds and assuming that that's what conventions are for.

Additionally complicating the matter is that there are some cons which are charities in this sense. Potlatch, for instance, exists financially for the purpose of raising funds for Clarion West, though this is done specifically by the auction. However, each Potlatch picks a community charitable organization to donate surplus funds to, and this choice is announced before the con.

[sbeckstead.livejournal.com]

Most but not all cons that I have been to usually have a charity auction of some sort and that is where they give to the community. Often the guest og honor picks the charity. A 501(c)(3) corp is defined as a public benefit corporation. I think I still qualify as a "public" and certainly all fans are of the "public". Benefiting fans who happen to be public is on the whole a rather good Idea. The rest of that argument is just garbage.

Scott

[yourbob.livejournal.com]

Having been involved with non-profits for many many years, I can't say I've heard (except from that person) an equivilency between "non-profit" and "charity". As you point out, the two are not interchangable.

Saying that, I doubt very much that the perception is wide-spread. Most probably because most people don't realize their con is being run by a non-profit. And those that do, understand the difference.

I'm very careful about the charities that I give money to. I am one of the people who would be extremely annoyed if "my" money were given to a charity I didn't know about ahead of time.

And this issue is one of the reasons (although a SMALL one - mostly it's a timing thing) that I haven't been to a Silicon. It's not the charity in particular in this case, it's the perception they're using the convention as a fundraiser.

[redneckotaku.livejournal.com]

The perception among some anime fans is that they are tickets to a rock concert and that you have to be entertained. I often have to say to people that they are memberships supporting a Non-Profit Educational organization. They still don't get it after I explain that to them. People have fun at these events, but it is not because we literally entertain them. We just try to provide interesting Japanese culture including Anime and J-Music. It takes the members by volunteering for panels and staff to make the event truely a success.

[renegade500.livejournal.com]

I sometimes wonder if people know how expensive running a con is (except of course for those who have a lot of experience doing so)? FACT, Inc., a 501(c)(3), which sponsors ArmadilloCon (AC) every year, made the decision a few years ago that any suplus from AC should be used for the running of future cons. We used to use some of the money for FACT's operating expenses (which are greater than our membership dues bring in), but felt it was more important that AC have the seed money they need to continue to bring in quality guests from all over the world. If we didn't, I think we'd be limited to regional (i.e. "cheap") guests, and that would affect not only our reputation, but really the feel of our con.

But the question of surplus is often iffy. We try to keep our membership at a cost that is not prohibitive (generally on average $30-40 for the weekend). There is, I believe, a tremendous benefit that is received for that price: the chance to spend time with a lot of writers and editors, discussing what we all love (I know I don't have to convince you of that benefit).

In my almost 10 year involvement with AC, it has not generated a surplus every year, and has more often than not lost some amount of money. This year's con was a lot smaller than previous ACs, which we expected, since we are sponsoring World Fantasy in Nov., and a lot of people could only go to 1 and chose to go to WFC. As a result, we do know that AC lost money this year (and a small amount last year). Luckily, we had some surplus from AC 25 a few years ago that has helped us out.

We are trying hard to make sure we maintain a good business relationship with our current hotel (i.e., we pay our bill on time, and are good guests while on their property), because that affects so many of our other business dealings, so we work hard to be fiscally responsible. Hardly dogding on taxes, and truthfully, it's a lot of work, considering we're all volunteers with real lives and day jobs and the like.

AC does also have a charity auction every year, publicized well in advance, so that those who wish to support our chosen charity may do so.

Renee

[(Anonymous)]

The only reason I know there is a diff between "tax-exempt" and "charity" is I served on the board of a community theater (most of them are tax-exempt, and surplus $$ pay for the next show, same as with a Con). I don't think the average fan is much different from the average mundane regarding the idiosyncrasies of the IRS codes.

I can see where people could view a con as a big party for authors because they are. We invite people whose work we appreciate to chat with us, eat drink and be merry with us. It's a celebration of their achievements, and I'd call that a party. Not only that, cons often pay authors (and artists and fan GoHs) to go to the party. I happen to think this is a Good Thing, but for the average Joe, YMMV.

[kevin-standlee.livejournal.com]

Not only that, cons often pay authors (and artists and fan GoHs) to go to the party. I happen to think this is a Good Thing, but for the average Joe, YMMV.

And some charities have paid employees and sometimes reimburse their volunteers' out-of-pocket expenses in pursuit of their (legitimate) goals. Some people seem to not understand why this would happen. There comes a point where I get tied up in knots trying to explain why this would be.

Conrunning groups organized as 501(c)(3) non-profit, tax-exempt societies have a purpose that includes literary and educational elements. Those elements are not always free of cost. One of the costs is usually renting the facilities. Another, perfectly legitimate one, is to pay for the expenses involved in the honored guests whose presence is part of the program that is the convention's purpose.

I guess what I'm saying is that people who don't think that's fair don't really think that conrunning groups should be tax-exempt organizations at all, and this sort of thinking, taken to a logical extreme, undermines a whole chunk of modern society.

[howeird]

that anonymous party comment was me (new PC forgot to log in)

[paradoox.livejournal.com]

I'm assuming she is not on your friends list???

I think it maybe be a little more complex. I think the OP has issues with "fandom" and "typical conventions" on several levels. Yes, part of it is not understanding 501c3 vs. charity. But, part of it is coming from for-profit (or not 501c3 conventions). Part of it maybe feeling that media is looked down on. Part of it is maybe feeling that her local fandom looks down on her. And part of it maybe throwing a convention (Cauldroncon) without setting up a 501c3 or LLC and losing a lot of money. AFAICT / AFAIR, she is not a member of the Arisia Board (which she could be just by paying her dues, nor is she a member of NESFA nor MCFI both of which are much harder. I had drafted a long message to the NESFA board about the background and never sent it since the tempest in the teapot seemed to be dying down. Of course, I'm still 500+ messages behind in SMOFS, so I'm not 100% sure. I've been reading the first handful and the last handful in each subject and marking everything in the middle read.

[sfrose.livejournal.com]

I don't think that she thinks all of the 501(c)3 convention running clubs out there are just attempting to dodge taxes. Just that she really never noticed that the type of organization is an "or".

Remember she is coming from the for-profit convention world. She was used to models where the organizer would pay some people and get others to volunteer their time. They patted themselves on the back back donating some of their profits (even though they didn't have to) to charities. So it just seems strange to her that "non-profit" clubs wouldn't be doing the same

Just my guess.

But I think she has me killfiled on smofs, or just refuses to acknowledge anything I say. I went back to try to find any message where she replied to me directly. So if she has me (and/or others) killfiled, she might not have been getting the full responses.

BTW, I really did try to give her honest advise. She just found it too depressing.