Info You Can Use: More Foreign Artist Withholding

The issue of the 30% with holding the United States levies against foreign artists doesn’t seem to be going away. Last year I wrote about my victory, with some help from the IRS, in educating my disbursement office about reading tax treaties with other countries. I thought between this new found knowledge and preparing the paperwork well in advance of a performance, most of the problems would be behind us.

Boy was I wrong.

When I returned from the Christmas holidays about two weeks ago, I had a letter from the IRS specifically directing us to withhold 30% from the payment we were making to an artist and then send them proof of having done so. You would think from such a letter that the performers were absconding from the country with huge amounts of cash, but we really aren’t relatively paying them all that much. Especially when you consider their agent gets a cut too. I don’t want to imply that the laws should be applied inconsistently, but it seems like the IRS is either focusing undue attention on small potatoes or they have shifted resources to scrutinize all foreigner artists’ activities. (I still say they would get more bang for their buck going after everyone sheltering money overseas.)

This story has a happy ending, at least for my organization. We received a letter from the IRS today saying the group has entered into an agreement with the IRS and we were specifically directed by name not to withhold the money. Still, the whole incident shows that the IRS is apparently stepping up their activities in this area and you need to be more aware of the laws surrounding withholdings. Artists from Abroad is a good place to start.

Info You Can Use: B Corporations

Daniel Pink had a tweet today to a Washington Post story about Maryland companies signing up to be classified as a “B” corporation in that state. The B for Benefit Corporation will allow for-profit companies to operate to pursue social ideals.

You may ask what is to keep any company from operating in socially responsible ways? Many companies align themselves with causes to burnish their image, after all. It is actually the stockholders which may pose a problem apparently. According to the newspaper:

“These hybrid entities pay taxes and can have shareholders, without the risk of being sued for not maximizing profits. Companies can consider the needs of customers, workers, the community or environment and be well within their legal right.

A benefit corporation, for instance, could choose to buy from local vendors at a higher cost to reduce its carbon footprint, much as the Big Bad Woof does. The company, as a part of the incorporation, is required to file an annual report on contributions to the goals set forth in the charter and submit to an audit by an independent third party. “

This is different from the L3C structure I have mentioned before. Like the L3C, this structure is not recognized by the IRS. Though I am not sure if it is in the same nebulous area the L3C because it doesn’t seem like B companies are meant ever qualify as a program related investment for foundations. Though there is probably a lot about the structure not covered in the news article.

More information about B corporations may be found online at a site created to advance these type of organizations. I didn’t find any discussion about how the IRS views these organizations and if there are significant restrictions to investing. According to the site the need for a B corporation are: (my emphasis)

“B Corporations address two critical problems:

* Current corporate law makes it difficult for businesses to take employee, community, and environmental interests into consideration when making decisions; and
* The lack of transparent standards makes it difficult for all of us to tell the difference between a ‘good company’ and just good marketing.”

This is an effort they are trying to take nationwide so if you are interested, don’t think it isn’t applicable to you just because you don’t live in Maryland. This could be a viable structure for an arts related organization. While the status doesn’t provide any tax breaks, doing well on the required audit can be a positive signal to interested investors.

Stuff To Ponder: Volunteer Bill of Rights

One of the many items I bookmarked to write on when I returned from my holiday break was an entry Robert Eggers did on the Volunteer Bill of Rights he helped institute at DC Central Kitchen. He said he took his inspiration from a concept championed by restaurant reviewers in the 1960s and 70s that diners had rights and didn’t have to take what was set before them if it was sub-par. (Hard to imagine there was a time when you didn’t send cold food back to the kitchen.) Eggers says this is what drove restaurants to offer better service and improved and expanded diners’ culinary knowledge to the point where we are now focused on the provenience of our food. One result he says is that every city now has great dining establishments rather than just a few cities.

In the same way the Internet provides a channel for customer driven feedback, Eggers feels that encouraging volunteer feedback and involvement will drive innovation faster than hiring expensive consultants. (DC Central Kitchen has 14,000 people volunteer every year which certainly does represent a lot of brain power.)

DC Central Kitchen’s bill of volunteer rights is:

ALL volunteers have the right to:
* Work in a safe environment.
* Be treated with respect by all staff members.
* Be engaged in meaningful work and be actively included regardless of any physical limitations.
* Be told what impact your work made in the community.
* Ask any staff member questions about our work.
* Provide feedback about your experience.
* Receive a copy of our financial information or annual report upon request.

They want their volunteers to ask the tough questions that will help them operate better, but Eggers says the middle right is the most important.

“….but the most purposeful of these is the one right in the middle—the right to “be told what impact your work made in the community”. THAT’S the kicker. We want, and think it’s critical, that every nonprofit in America be prepared to answer that question, in detail. No more fuzzy, feel good platitudes. No more bromides, brothers and sisters—it’s about facts and figures. Verifiable, Hard Core, Detailed Deeds.”

And following his philosophy of using the feedback of volunteers to make DC Central Kitchen run better, he solicits the assistance of the reader and offers some himself.

“We are an open source organization, so feel free to use this Bill of Rights in your shop. Add more rights if you see fit. If they rock, let us know so we can adapt our version. Call if you want and we’ll talk about how we trained our staff to translate talking to volunteers about these rights into opportunities to elevate the idea of what we are doing, together, so that folks can’t wait to come back—with friends, time and wallets in tow.”

Stuff To Ponder: Alternatives To Forming A Non Profit Org

If your new year’s resolution is to do good this year, go for it! But if you are thinking of starting up a non-profit, you should be aware of the challenges you face. Both the normal processes to follow when starting a new organization as well as emerging scrutiny by the federal government. The Non-Profit Law blog has been packing a lot of informational goodness in their posts over the end of last year and the transition in to this one. Among their tweets of the week for last week was news of extra scrutiny of non-profits by the IRS.

The Gene Takagi and Emily Chan who write Non-Profit Law Blog also linked to a piece they wrote for the American Bar Association outlining the considerations a lawyer and their clients should use to evaluate whether they should actually form a non-profit organization. Many of the suggestions made are just good sense for forming any business including evaluating the need, whether it duplicates the efforts of another group, if there is sufficient clientele and a support base present in the community. They make suggestions of alternatives to consider.

But another person they link to in their tweets of the week really does a great job of providing these alternatives. Allison Jones makes suggestions for 6 alternatives with links to more information about pursuing these options.
I had never heard of an intrapenuership myself.

* Free agent: More and more people are affecting social change outside of an organization. Harnessing social media, you can mobilize your network to take action or support a cause without the hassle of incorporating….

* Informal group/club: If the issue you are addressing is small or very specific (cleaning up a local park or stacking shelves in a local food pantry) you may just be able to round up a group of friends and get to work….

* Giving circle: … In giving circles you pool money and resources together to support an organization you all select. The focus is usually on a local organization, often extends beyond giving financial support, and the circles can be formal or informal….

* Local chapter of a national organization: … You can build on existing resources, support, and guidance to make a difference. Organizations that focus on professions, such as Young Nonprofit Professionals Network, Grant Managers Network, or Emerging Leaders in the Arts, tend to have chapters across the country. However other organizations in different causes, like the Reeve Foundation are open to supporters launching local chapters as well….

* Intrapreneurship: Do you work or volunteer for an awesome organization? Maybe you noticed a need because of the work you do? This can be tricky as many organizations are pressed for resources and time. However, you can harness your organization’s infrastructure to make small steps in addressing the need you have identified. Organizations are more willing to support innovation if there is someone (i.e. YOU!) willing to take the lead. Start by collecting information on the need and presenting it to your organization….

* Fiscal sponsorship: In fiscal sponsorship a nonprofit will allow you to operate under their 501c3 status….You should find an organization whose mission and work align with what you want to do and reach out to them directly….