Fund Raising Pitfalls
The best way to deal with a fund raising problem is to avoid it. This page includes some tips and information which may help you as your club plans its fund raising efforts.
This is by no means meant to be authoritative, and in any regard do your own research. The specifics will vary from community to community, state to state and country to country. Click on the respective link to jump to a discussion of each issue:
Sales Taxes
This is a big issue. Let's look at it in two parts:
The club as a tax collector
In many states, Kiwanis clubs are required to collect sales taxes when they sell a product to the public. This is not to be confused with being tax-exempt; the issue is the exemption of the purchaser, not the club.
For example, New York State requires clubs to collect sales tax when clubs put on a dinner or sell refreshments. A check has to be sent to the state every quarter.
While some will argue that clubs are "tax exempt" and don't have to worry about sales taxes, in many jurisdictions they are mistaken. Kiwanis Clubs seeking to abide by Kiwanis Ethics will find that they only action they can take is to comply with the jurisdiction in which they operate.
The club as a taxpayer
Again, state laws vary. But in New York State, clubs are required to pay sales taxes when they buy something which is for club operations, for example, meals eaten by members at meetings, supplies purchased for club activities, etc. Even if your club has a have a club foundation, items which are purchased for the club, rather than for a service project, are taxable. For example, sales tax would be paid on picture frames for awards given to members. No tax would need to be paid on lumber purchased by a club foundation to be used to build wheelchair ramps.
Note that you also do not have to pay sales tax on items you buy which become products that you sell and collect sales tax when you sell them. For example, if you buy light bulbs and re-sell them for profit, you do not need to pay sales taxes on the light bulbs when you buy them, although you do need to collect sales taxes when you sell them.
Many clubs don't actually add the sales taxes to the sale price, as that would make selling items more difficult. Instead the tax is included in the sale price.
Liability Insurance
All Kiwanis officers of the past few years are aware of the insurance issues which arise when public events are going on.
Most clubs have an insurance agent among their membership. Clubs may be well advised to recruit one to look at the Kiwanis-supplied coverage and act as your club's insurance advisor. You may find you need to purchase additional coverage for some events.
Also note that the Kiwanis-supplied coverage does not include what is commonly called "officers" insurance, although that is available through the same company for an additional premium.
Clubs planning events would be well served to read the policy, note coverages which are available and act accordingly.
Gambling/Raffles
Again, the laws will vary greatly from state to state. Many states regulate any type of raffle, requiring that you obtain a permit in advance and comply with rules which have been laid down.
Food Service
In nearly every jurisdiction, you will need a health permit to sell food which you have prepared. Often the permits are not difficult to obtain and often the local Health Department staff will do everything they can to help not-for-profit groups comply with the law. The attitude will be much different, however, if they find you selling food without a permit. After all, they're the ones who will be getting all the telephone calls if there is an outbreak of a food borne illness.
Club Foundations
Club foundations are a great way to make it possible for people to get a tax deduction when they make a donation to your club's projects. Additional responsibilities come with them, however.
A foundation must be set up according to the rules of Kiwanis International and the state where the club is located. Kiwanis International has an excellent package of information available on how to go about this, and what the advantages and disadvantages are. You can get that by contacting the club services department.
Once you decide to set up a foundation, you're going to need a lawyer to do it for you. Perhaps you can get a club member to do it for free; if not, there often are community-minded lawyers around who do them frequently and would do it at discounted rates. There also will be filing fees which will have to be paid.
Once your foundation is in place, you need to be aware of the obligations to file annual tax forms with the Internal Revenue Service. Known as Form 990, the returns from non-profit organizations are little known by the general public. But rest assured you don't want to tangle with the IRS.
Do you have additional advice you'd like to offer to Kiwanis clubs?
Let me know and I'll consider adding it here.