Published by IL NET / ILRU NetWork Quarterly

July 2001

To be or not to be 501(c)(3)?

In this issue...SILCs as nonprofits?

In producing these articles, we spoke with SILCs representing pretty much the full spectrum of experiences and attitudes about becoming a nonprofit.Some of them believe (strongly!) that nonprofit status is the only way to achieve the independence and autonomy the federal law requires.Others are “on the fence,” and give us insight into the things you consider when deciding which way to go.And we feature one SILC that’s taken a completely different approach by becoming a state agency. For SILCs ready to take the plunge, we cover the basic steps to incorporating and getting recognized by IRS as a 501(c)(3) organization.We’ve also added some websites and other good resources we hope will help. Autonomy and credibility are important elements of a SILC’s effectiveness in carrying out its role.Whether or not you agree that being a nonprofit is the best way to achieve those traits, we hope you’ll find this newsletter thought provoking and useful.

To be or not to be 501(c)(3)?

Growing number of SILCs are “going nonprofit” for autonomy

Some SILCs “will only be able tolerate the ambiguity for so long,” Michaels believes, before they will get serious about becoming an independent nonprofit organization.Even then, he advises, how much autonomy a SILC will realize depends on how well it negotiates for control of the federal funds that still must be channeled through the DSU. Most nonprofit SILCs, says Michaels, get their funds through a contract with or grant from the DSU–and this is really where autonomy is established.He suggests that the SILC must be sure the agreement allows sufficient control, latitude and independence to do the things it wants to do.  He stresses, however, that with control of the dollars comes added responsibility.If it expects the DSU to hand over the money and get out of the way, a nonprofit SILC will have to establish policies and procedures for spending and accounting for the funds.The SILC will also need a clear plan spelling out how it will accomplish the grant or contract’s requirements. To contact Bob Michaels, call 480-961-0553 or send e-mail to michaels@impulsedata.net.

Desire for “true consumer control” prompted Kansas SILC to become the nation’s first nonprofit council

I know who my boss is–it’s the president of the SILCK. It’s not the governor or the secretary of state or the VR director. - Shannon Jones, Kansas

The transition started with“a lot of discussion and consideration” between SILC members, the DSU and governor’s office, Jones says.One of the first things they had to work out was how to incorporate as an autonomous entity when the governor appoints the membership.“The concern was,” Jones explains, “the appointments could be looked upon as political appointments and, thereby, not meeting the criteria of a stand-alone entity.” The lawyer paid for with $1,200 in Part B IL funds–“the best money we ever spent,” says Jones–came up with the solution.In its Articles of Incorporation, the SILCK is established as a membership organization–open to all residents of Kansas.The governor, then, appoints board members from among the candidates selected from the membership and recommended by the SILCK board.  With state incorporation papers filed, the SILCK moved on to getting set up with IRS as a 501(c)(3) tax-exempt nonprofit organization.As the first of a kind to apply for the designation, Jones says it took several months of correspondence with the tax agency to figure out just what kind of organization a SILC is.Generally, though, Jones describes the process as “simple.” Jones hopes the SILCK has paved a path to independence that other SILCs can easily follow.“It should be a SILC’s highest priority to say ‘we are consumer-controlled–we’re not VR controlled,’” she says.“I think the real proof of the pudding is who signs your paycheck–that’s who you work for.”

Contact Shannon Jones by phone at 785-234-6990 or send e-mail to shanoz@aol.com.

As a nonprofit, Georgia SILC supports CIL development

“If you want to have people with disabilities in a central role in the IL movement, you’ve got to get your hands on the money.” Pat Puckett, Georgia

Today there are six CILs–two funded with Part B dollars and four with Part C funds–and two more in the works.“Now the SILC is a significant force in the development of CILs,” Puckett says. The two best things about being a nonprofit organization, Puckett says, are the autonomy and the ability to raise funds–especially private funds that can be used for things like lobbying and ADAPT activities.For example, last year the SILC raised private funds to support a large coalition of organizations in its lobbying activities related to an Unlock the Waiting Lists campaign.“As a result of that campaign,” she says, “our state legislature made the biggest financial commitment in our history for home and community-based services.” The freedom of being a nonprofit group, Puckett points out, comes with new responsibilities that may require developing some new skills.“It requires more energy and vigilance to sustain your organization,” she says, noting that nonprofit corporations are required to maintain minutes and other records, as well as file annual tax returns.“Without a clear vision of the future and strong leadership,” she advises, “you can get caught up in organizational minutiae that will eat you alive.” Call Pat Puckett at 770-270-6860 or send e-mail to silcga@mindspring.com.

More confidence a by-product of Arkansas SILC’s nonprofit move

“...this is the way it’s intended to work. We’re our own organization now.” Jim Eakin, Arkansas

With the accomplishment came a sense of pride and a new way of approaching the SILC’s business.According to Strickman, one of the first opportunities to step up to the new status came when it was time to renegotiate the state plan, which includes the SILC’s resource plan and budget.“We had to rise to the level of being a 501(c)(3),” Strickman says, describing the council’s preparation prior to submitting its proposal to the two state rehab agencies (blind and general). The first three-year proposal the new nonprofit SILC submitted included three unprecedented requests: 1) to continue to pay for the council and its activities with Title I strategic planning funds (making more Part B funds available for services), 2) to increase the SILC’s budget to nearly double its previous level, and 3) to give Arkansas’ CILs a much larger percentage of the Part B dollars.When the negotiations were over, the SILC prevailed on all three requests. Strickman and Eakin agree things might not have turned out so well if the SILC had not become a nonprofit.Aside from having a better sense of how to document and present a proposal, Eakin says the council was more confident in its negotiating position. “We have standing and respect that we didn’t have before,” he says. About the same time the SILC was negotiating the new plan, it was also asserting its independence by leading the advocacy effort for passage of a state IL Act.The council realized partial success on the first try.The legislation passed, but was not funded. Getting state funds attached to that law is still on the SILC’s agenda, as are a number of activities that the pre-nonprofit organization might not have thought of–or attempted.Eakin says that’s because the council is becoming more comfortable with its new role and responsibilities and is starting to “think more outside the box.” “We’re still growing and still defining ourselves,” he says.“But we’re getting to the point that the Arkansas SILC is something people can count on.”

Contact Jim Eakin, Arkansas SILC director, at 501-372-0607 or send e-mail to ailc@alltel.net.

Call Danielle Strickman, new Florida resident, at 305-443-3364 or send e-mail to dstrickm@earthlink.net.

Idaho SILC seeks balance between desire for autonomy and realities of being an employer

We originally made a specific decision not to become a nonprofit because we felt like there was the potential to be less autonomous as a 501(c)(3) than as a state entity. Kelly Buckland, Idaho

For the first time, the education board imposed limits on how much money the SILC could request from the state legislature, took away the SILC’s lump sum budget authority and reduced employee salaries and benefits.Buckland says the new restrictions may be the legislature’s unfavorable response to the SILC’s advocacy activities.Now, he says, the council is taking another look at going nonprofit. But the decision is not easy for a council that places a high value on compensating staff with competitive salaries and benefits.The SILC is stymied by how to replace employee benefits–especially health insurance–that are currently provided by the state.“The problem is,” Buckland explains, “with a staff of 2.5 people, you’re too small to be a group for health insurance and any other kind of coverage is not available.” Buckland says the SILC is also concerned it will be difficult to find funds for support services that are currently provided through the state.Combined with the employee concerns, Buckland says, that’s enough to cause the council to think twice about making a move.Nonetheless, he says, if the insurance issue can be resolved, the SILC will most likely seek nonprofit status. In the meantime, the council is exploring other ways to restore autonomy to its current situation.Buckland says one possibility is a memorandum of agreement that would establish the SILC as an “independent state entity” required by federal law and protect the education board from liability for SILC activities.

To contact Kelly Buckland, send e-mail to kbuckland@silc.state.id.usor telephone 208-334-3800.

In California, SILC functions as an independent state agency

“It’s a good role to play, because when people decide it’s time to go to the capitol to demonstrate we can go inside and talk to the people who are being demonstrated against and tell them why there are protests outside–and what might be done to keep it from recurring.” Mike Collins, California

“It’s a very good situation in a lot of ways,” Collins says, “especially when it comes to our role within the state bureaucracy.We have the same status as other independent state agencies.I have peer standing with other department directors–and that’s helpful in working on issues that are important to people with disabilities.We also have opportunities to work with the governor and his key staff.We can make sure they understand the independent living perspective on disability issues.” The arrangement does limit the California SILC’s “flexibility” to some extent when it comes to direct advocacy, Collins says.“We are a cabinet agency.In reality our role is to educate the Legislature, other agencies, consumers, the general public and the governor about disability-related issues, and to do that effectively we don’t have to take a public stance that would affect him negatively.”  Instead, Collins says the SILC uses its status within government to transmit information from the advocacy community to state leaders–and vice versa.“The SILC might not always be at the table alongside disability advocates who appear to be most vocal on state policy issues,” he says, “but a lot of the people who are at the table are there because they learned about the issues and opportunities from us.”

Contact Mike Collins at 916-445-0142 or send e-mail to mcollins@calsilc.org.

Going nonprofit: The IL Net’s guide to the basic steps to becoming a 501(c)(3) nonprofit organization

• Your board and/or council members. They need to agree on the reasons for going nonprofit, understand the pros and cons and understand and accept what will be required of them during and after the process.
• The designated state unit (DSU) or other “parent” organization. They may be all for it–they may not.If they support you, they may be able to help.If they don’t support you, it’s still smart to keep them informed.
• The governor (if you’re a SILC). Governors generally don’t like surprises.Since they appoint your members, it’s important to keep them in the loop.Explain why you’re seeking nonprofit status and resolve any issues or concerns up front.It’s likely to keep your appointments process on the right track, and having the governor’s support sends a powerful message to DSUs and others who may be impacted by the change.

#2. Get stuff

There’s a lot to know and do in order to be qualified as a tax-exempt nonprofit organization.While the steps are pretty logical and straightforward, it’s important to know how they relate to each other.For example, one of the first things you’ll do is register as a nonprofit corporation in your state.Some of the information included in your articles of incorporation is critical to gaining IRS approval as a tax-exempt organization later on.So you’ll want to be familiar with the IRS requirements before you start setting up the corporation. To get started, you’ll need:

• Forms and procedures for establishing a nonprofit corporation. The process may vary from state to state.Your state’s comptroller and/or secretary of state’s office is a good place to start.

• IRS Publication 557, Tax-Exempt Status for Your Organization.This document provides a detailed overview of the application process and devotes a whole section (Hint: It starts on p.13) to 501(c)(3) organizations, including sample articles of incorporation.

• IRS Package 1023: Application for Recognition of Exemption.This is the form you’ll use to apply for 501(c)(3) and step-by-step instructions.
• IRS Form SS-4: Application for Employer Identification Number. If you don’t already have one, you need to get one.You can submit this form with the 1023 application.

• Even if it’s just for a two-hour meeting, it’s a good idea to consult with a CPA about your plans for becoming a nonprofit and the things you need to do.He or she can help sort through things like what fiscal year to use, what accounting method is best for your organization and how to create a financial plan that IRS will accept.You’ll have to spend some money, but it’s likely to be a lot less than what you’ll pay to clean up a mess later on–when IRS slaps a penalty on you, for instance.
• Locate a CPA who has experience working with nonprofits.Ask how much of their business is devoted to it.Ask for names of some of their clients.Find out the typical size of the organizations they work with.Look for a CPA who works with groups that resemble yours.

• Find a CPA who’s familiar with the kind of work you do and knows what’s requiredof groups that get state and/or federal grants and/or contracts (i.e., audits, reporting requirements).
• If you don’t know a CPA who fits the bill, check around with other nonprofits that are similar in size and function to yours.Talk to some of your community leaders who are likely to have been down the nonprofit path a time or two.
• Be a little cautious of prominent local attorneys or CPAs who volunteer to donate the services.Often they will delegate the task to a staffer who may not have the necessary experience or background.
• Be cautious, too, of board members or volunteers who offer to handle it.They may have excellent experience handling nonprofit matters–and that’s good.Then again, they may not.
• If you’re going to do fundraising as a nonprofit, don’t start before you actually are a nonprofit.Sometimes groups get the cart before the horse and generate funds before they’re legitimate nonprofits.IRS has a word for this–fraud.

United States Postal Service –new.usps.com (click to Business Mail 101/Nonprofit Rates)

get help

The nonprofit lobby

The Charity Lobbying in the Public Interest website is another outstanding resource–especially for information about how to lobby legally with fewer restrictions.Get there via Independent Sector’s home page: http://www.independentsector.org/.

New Mexico SILC came “this close” to making the transition to nonprofit

In addition to the usual things that come up in the course of incorporating and getting established as a 501(c)(3), the SILC had to work its way through someprocurement and funding issues peculiar to New Mexico state law.But even those complexities were not the final stumbling blocks.In the final analysis, it was a personnel issue that brought the process to a painful end. From the time the SILC was created, a consultant–controlled by the SILC and paid for by the DSU–coordinated its activities and provided administrative support.As a nonprofit, the SILC planned to establish a full-time executive director’s position.In fact, they had already found the person they wanted and he had moved to New Mexico to lead the SILC into the transition of becoming an accountable, full-fledged nonprofit.He agreed to come on as a co-consultant until the transformation to a freestanding nonprofit was complete.Ballinger says, at the time, it seemed like the ideal situation because he would have some time to learn the ropes and the outgoing consultant could finish out her contract with the DSU.  It was less than ideal.The consultants clashed.They accused each other.They accused the VR agency.And the new guy left on two days’ notice.“Talk about hours and hours of work just going down the tube,” Ballinger says sadly. “It put us in terrible disarray.”In hindsight, she says, it might have been better to skip the transition step and let a new director take on the challenges of running the operations of a brand new nonprofit and learning about the SILC at the same time. If nothing else, the situation highlights the importance of developing strong skills in an area that may be new to SILCs that are stepping out on their own for the first time–personnel management.Blase Gaude, who chairs the SILC now and was on hand for the debacle, says if nothing else “we’ve learned some important lessons about the recruitment process and some of the complications that go along with being responsible for an employee.”  Guade says, while there hasn’t been any serious discussion about it since the failed effort, the option to go nonprofit remains open.“Because we have a great relationship with the VR director right now,” he says, “we’re not setting roofs on fire to get it done.”But, he adds, “we do want to be in position in the event things change–which can easily happen in government.”

Julie Ballinger is a disability rights and independent living consultant in Albuquerque, NM, and can be contacted at 505-797-8612 or by e-mail at julieb4@flash.net.

Contact Blase Gaude, SILC chair, at bpgaude@sandia.gov or call 505-844-5749.

NetNotes

• Declaring that “unjustified isolation or segregation of qualified individuals with disabilities through institutionalization is a form of disability-based discrimination,” President Bush signed his long-awaited Executive Order on Community-Based Alternatives for Individuals with Disabilities on June 19.The order and a fact sheet are posted on the White House website: www.whitehouse.gov/news/releases/2001/06/20010619.html
• The Health Care Financing Administration has issued a solicitation for proposals related to its Systems Change for Community Living initiative, described in detail in our last issue of ILRU NetWork. There are four distinct grant solicitations in the coordinated invitation: Nursing Facility Transitions, Community-Integrated Personal Assistance Services and Supports, Real Choice Systems Change and National Technical Assistance for Community Living. You may recall that CILs are specifically named as eligible applicants in the Nursing Facility Transitions and PAS grants.The deadline for the Technical Assistance grant is July 16.The rest are due July 20. More detailed information is available online at HCFA’s website: www.hcfa.gov/medicaid/systemschange.
• There’s still time to sign up for the last of this year’s Learning Online training series–Ethics and Values.The deadline for registration is Aug. 20.The three-week course begins Sept. 10.The training will be conducted as a “forum” in which participants take part in discussions led by instructor Richard P. Oestreich, Ph.D.Learning Online is a collaborative effort of the IL Net, ILRU/NCIL National Training & Technical Assistance Project and RehabLeadership Program at the University of Northern Colorado. For more information about the course and how to register, visit the IL Net Training Calendar on the ILRU website.
• Is your flame of enthusiasm for advancing the causes of the independent living movement in danger of flickering out?Are the high demands for your time, energy and creativity pushing you to the brink of burnout?If so, you won’t want to miss our next issue of ILRU NetWork. The topic is burnout–what’s causing it, the toll it’s taking on the IL community and ideas for what to do about it.We want the newsletter to be meaningful to you, and you can help make sure it is by sharing your own experiences with burnout, resources you’ve found helpful and/or ideas for keeping that fire burning. Send your comments via e-mail to ilru@ilru.org or call Carri George at 713-520-0232.

For more information, contact:

The mission of the IL NET is to provide training and technical assistance on a variety of issues central to independent living today--understanding the Rehab Act, what the statewide independent living council is and how it can operate most effectively, management issues for centers for independent living, systems advocacy, computer networking, and others. Training activities are conducted conference-style, via long-distance communication, webcasts, through widely disseminated print and audio materials, and through the promotion of a strong national network of centers and individuals in the independent living field.

ILRU is a program of The Institute for Rehabilitation and Research (TIRR), a nationally recognized, free-standing medical rehabilitation facility for persons with physical and cognitive disabilities. TIRR is part of TIRR Systems, which is a not-for-profit corporation dedicated to providing a continuum of services to individuals with disabilities.

Substantial support for development of this publication was provided by the Rehabilitation Services Administration, U.S. Department of Education. The content is the responsibility of ILRU and no official endorsement of the Department of Education should be inferred.

©2005 ILRU Program, All rights reserved