Transcript Formation of Non-Profit Corporation

Missouri Association of School
Business Officials
2013 Spring Conference
Presented by:
Mickes Goldman O’Toole, LLC
555 Maryville University, Dr.
Suite 240
St. Louis, MO 63141
tel. 314.878.5600
fax. 314.878.5607
107 N. Main St., Ste. 2E
Columbia, IL 62236
tel: 618.281.2700
fax: 618.281.2701
221 West Lexington
Suite 114
Independence, MO 64050
tel: 816.874.8000
fax: 816.874.8925
E.J. Miller
Mickes Goldman O’Toole, LLC
St. Louis, Missouri
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Provides vehicle for District to accept targeted
Contributions
Receive Bequests, Invest and Manage
Testamentary Gifts
Scholarship funds
Annual Fundraisers/Golf Tournaments
Targeted Fundraising/Specific District Projects
Capital Equipment Leasing
Lease-back Financing
Form a Foundation
Step 1Missouri Non-profit Corporation Act
Section 355.001 et seq. RSMo
The basic corporate documents required to form a Missouri
Non-profit are the following:
Articles of Incorporation;
By-Laws of the Corporation;
Unanimous Consent of Board of Directors attesting to the
adoption of By-Laws; and,
Secretary’s Certificate.
Step 2
Complete the Organizational Documents
& Obtain Tax Exempt Status
To establish tax-exempt status, the corporation must
prepare and file the following:
 Form SS-4 to obtain an Employee Identification
Number (EIN);
 IRS Form 1023. This form is filed in order to qualify
as a Section 501(c)(3) tax-exempt entity.
Other Tax filings:
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Form 1746 Missouri Department of Revenue –
Sales Tax Exemption;
Form 2643 Missouri Department of Revenue – to
be filed in the event you expect to sell products
and wish to be exempt from collection of sales tax;
Registration as charitable organization to be filed
with Missouri Attorney General’s office.
Step 3
Annually, the Foundation must file the following:
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IRS Form 990;
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Missouri Annual Charitable Organization Report;
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Annual Corporate Registration Report.
How is a non-profit different from a “regular”
corporation?
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Exclusive Purpose of Entity Must be Nonprofit
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May not have shareholders
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May not pay dividends or unreasonable compensation
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May not make other distributions for the profit of
private individuals
The Basics – Information your attorney will need from
you:
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The corporation’s name;
A statement that the corporation is either a public
benefit corporation or a mutual benefit
corporation;
The street address of the corporation’s initial
registered office and the name of the initial
registered agent;
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The name and address of each incorporator;
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A statement as to whether the corporation will
have members; and,
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Provisions not inconsistent with the law regarding
the distribution of assets on dissolution
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Purpose: The corporation is organized exclusively for charitable,
educational, religious, or scientific purposes within the meaning of Section
501(c) (3) of the Internal Revenue Code.
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Inurement of Income: No part of the net earnings of the corporation shall
inure to the benefit of, or be distributable to, its members, directors,
officers or other private persons except that the corporation shall be
authorized and empowered to pay reasonable compensation for services
rendered.
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Legislative or Political Activities: No substantial part of the activities of the
corporation shall be the carrying on of propaganda or otherwise
attempting to influence legislation and the incorporation shall not
participate in or intervene (including the publishing or distribution of
statements) in any political campaign on behalf of any candidate for public
office.
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Operational Limitations: Notwithstanding any other provisions of
these articles, the corporation shall not carry on any other activities
not permitted to be carried on (a) by a corporation exempt from
Federal Income Tax under Section 501(c) (3) of the Internal Revenue
Code of 1954 (or the corresponding provision of any future United
States Internal Revenue Law) or (b) by a corporation, contributions
to which are deductible under Section 170(c) (2) of the Internal
Revenue Code of 1954 (or the corresponding provision of any future
United States Internal Revenue Law).
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Dissolution Clause: Upon the dissolution of the corporation,
the Board of Directors shall, after paying or making provisions
for the payment of all of the liabilities of the corporation,
dispose of all the assets of the corporation exclusively for the
purposes of the corporation in such manner, or the such
organization or organizations organized and the time qualify
as an exempt organization or organizations under Section
501(c)(3) of the Internal Revenue Code of 1954 (or the
corresponding provision of any future United States Internal
Revenue Law), as the Board of Directors shall determine.
Govern the conduct and operation of the Foundation
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The initial bylaws are adopted by the incorporators
or the board of directors.
The board of directors of a nonprofit corporation
must consist of 3 or more persons, with the number
of directors specified in the articles of
incorporation.
The board of directors may also be referred to as a
“board of trustees, a board of regents or a board of
overseers.”
The articles or bylaws must specify the terms of the
directors.
Powers. All corporate powers shall be exercised by … the board of
directors of this corporation. The board of directors shall have and is
vested with all and unlimited powers and authorities, …; provided,
however, that (a) the board of directors shall not authorize or permit
this corporation to engage in any activity not permitted to be
transacted by the articles of incorporation or by a corporation
organized under the Missouri Nonprofit Corporation Act, (b) none of
the powers of this corporation shall be exercised to carry on activities,
otherwise than as an insubstantial part of its activities, which are not in
themselves in furtherance of the purposes of this corporation, and (c)
all income and property of this corporation shall be applied
exclusively for its nonprofit purposes.
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This corporation shall not engage in any activity which may not be engaged in
by a corporation which is exempt under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, or the corresponding provisions of any
future federal internal revenue laws then in effect.
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No substantial part of the activities of this corporation shall be the carrying
on of propaganda, or otherwise attempting, to influence legislation. This
corporation shall not directly or indirectly participate in, or intervene
(including the publishing or distributing of statements) in, any political
campaign on behalf of (or in opposition to) any candidate for public office.
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No part of the net earnings or other assets of this corporation shall inure
to the benefit of any director, officer, contributor, or other private individual,
having, directly or indirectly, a personal or private interest in the activities of
this corporation, except that this corporation shall be authorized and
empowered to pay reasonable compensation for services rendered and to
make payments in furtherance of the purposes set forth in this Section 3.2.
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Nonprofit corporation must have a chairperson or
president or both, a secretary, a treasurer, and such
other officers as are appointed by the board.
Superintendent is typically an ex-officio member.
Officers of tax-exempt organizations who are not
compensated for their services shall be personally
immune from liability arising out of the conduct of the
affairs of the corporation.
The immunity does not apply to intentional conduct,
wanton or willful conduct or gross negligence.
D&O Insurance
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To qualify for tax-exempt status, a corporation
must file an application for exemption on Form
1023 within 27 months from the last day of the
month in which the corporation is incorporated.
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If a charitable organization files within 27 months
from formation, tax-exempt status will be
retroactive to date of formation.
If the application is filed after that date, exempt status
will be effective only as of the date a complete
application is filed, not as of the date of incorporation.
 IRS will issue a ruling or determination letter holding a
nonprofit corporation to be exempt in advance of its
actual commencement of operation if the application
is timely filed.
Instructions for Form 1023
Sample Form 1023
501(c)(3) Non-Profit Manual
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Exempt nonprofit corporations are generally
required to file annual information returns on Form
990 in lieu of income tax returns. We recommend
you post Form 990 on Foundation website.
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Many organizations that do not normally have
annual gross receipts in excess of $25,000 are
exempt from filing Form 990, but we shall
recommend you file these in any event.
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Advance Funding Commitments can serve to enhance
a Bond Issue
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Band Uniforms
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Stadium enhancements
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Science labs
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Artificial turf
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Scholarships
Special uses of Foundations:
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Lease Financing
 A means of legally borrowing money for the long-term;
 No election required unless an increase in the operating
levy is necessary due to lack of sufficient revenues from
current sources
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Lease-Back Transactions (Certificates of
Participation)
 Legal structure requires an agreement with a not-for-
profit organization for Missouri School Districts when
project involves land acquisition, new construction or
improvements to permanent facilities
 Tax exempt interest to investors – low interest rates
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Results in slightly higher interest rates and costs of
issuance compared to General Obligation Bonds
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Chapter 177: School Property and Equipment
Section 177.088: Facilities and equipment may be
obtained by agreements with not-for-profit corporation
“The board of any educational institution may enter into
agreements…with a not-for-profit corporation…in order
to provide for the acquisition, construction,
improvement, extension, repair, remodeling, renovation
and financing of sites, buildings, facilities, furnishings
and equipment for the use of the educational institution
for educational purposes.”
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Base Lease
 The District agrees to convey a leasehold interest in certain real
property located in its boundaries in order for the Not-For-Profit
Corporation to sublease the property back to the District on an annually
renewable basis in consideration of base rental payments to be made
semiannually by the District. The term of the base lease usually runs five
years beyond the final maturity of the financing; however, it collapses
once the final payment of the Project Lease occurs.
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Project Lease
 The Not-For-Profit Corporation will lease the encumbered facilities
back to the District and will issue Lease Certificates of Participation
through a Trustee Bank under the Trust Indenture. The Lease
Certificates of Participation are in the Project Lease Agreement.
Special thanks to L.J. Hart & Company for their input and assistance with
the Lease-Back Financing section.
For more information on School District Foundations, please
contact me:
555 Maryville University, Dr.
Suite 240
St. Louis, MO 63141
tel. 314.878.5600
fax. 314.878.5607