We thought it would be a good idea to extend the statement we made a few days ago. we have done so through this series of questions and answers.
If you have any other questions about what we do, why we do it or how we do it, please include them here.
Q: What is the difference between nonprofit and tax exempt?
A: Nonprofit status and tax exemption are two separate (though related) things. First, in California, an entity can be formed under the nonprofit public benefit corporation law. This means it has no stockholders (no one owns it), and its assets are held for the benefit of the public. These are commonly known as “nonprofits”. Second, a nonprofit can then become tax exempt (and offer tax deductions to its contributors) by applying for and receiving approval from the state where it operates and from the IRS, as explained here:
DHF incorporated as a nonprofit public benefit corporation in March 2008. It filed for tax exemption with the IRS later in 2008
and is currently waiting for a final determination from the IRS about our application for tax exempt status (http://nonprofit.about.com/od/qathebasics/f/donothaveto.htm). Diabetes Hands Foundation has specifically applied for 501©(3) (charitable) status with the IRS. and obtained 501©(3) (charitable) status from the IRS, Sept. 21, 2009. As a result, donations to DHF as eligible to be deducted.
Q: So, if you are not tax exempt you can still ask for donations?
A: Yes. Please note, however, that donations will not be eligible to be treated as charitable tax deductions unless and until the foundation receives recognition of Section 501©(3) tax-exempt status. (The rules for gifts to an entity waiting for its IRS determination are complicated, as the exemption if granted is sometimes retroactive to the date of incorporation; if you wish to treat your donation as a charitable deduction, consult your tax advisor first.)
Q: Why can Diabetes Hands Foundation sell advertising on TuDiabetes.com and EsTuDiabetes.com?
A: Nonprofits are allowed to sell advertising and engage in activities that are not directly related to their mission as a nonprofit to make money to support their charitable activities. Income from these activities may constitute “Unrelated Business Income” and, if so, nonprofits may be required to pay tax on this income: http://nonprofit.about.com/od/nonprofitmanagement/f/Unrelated.htm
Q: What is a Fiscal Sponsorship?
A: A fiscal sponsor (
http://nonprofit.about.com/od/glossary/g/fiscalsponsor.htm ) is “a nonprofit, tax-exempt organization that acts as a sponsor for a project or group that does not have its own tax-exempt status.”
Alongside with our application for tax-exempt status from IRS, Diabetes Hands Foundation has applied for a Fiscal Sponsorship. This will allow donations to our fiscal sponsor for the purposes of Diabetes Hands Foundation to be eligible to be treated as a charitable tax deduction before the foundation obtains 501©(3) status.
We will be making an official announcement about this in a few days.
Q: How does the money donated to Diabetes Hands Foundation get used?
The Diabetes Hands Foundation has two goals: connect people touched by diabetes and raise diabetes awareness. To date, the money donated to Diabetes Hands Foundation has been used in the following way:
- Approximately 75% of the money has been used to maintain our social networks and our diabetes awareness programs, the core of our mission;
- Approximately 15% has gone to support our fundraising efforts; and
- The remaining approximately 10% covers administrative expenses.
Of course, future expenditures may change to accommodate changing circumstances and priorities.
Q: Does money donated to Diabetes Hands Foundation get dedicated to find a cure for diabetes?
No, DHF has never made claims that it asks for donations to find a cure for diabetes (although of course a cure is something we all want!). Diabetes Hands Foundation collaborates openly with organizations such as JDRF and DRI, which are focused on finding a cure for diabetes.
Q: Who are the members of the Board of Directors of the Diabetes Hands Foundation?
A: We have a six-person board of directors (in alphabetical order), made up of unpaid volunteers (with the exception of Manny Hernandez and Andreina Davila):
- Cesar Castro
- Andreina Davila
- Henkel Garcia
- Luis Garcia
- Manny Hernandez
In addition, Andreina Davila serves as Creative Director and Secretary of the Board, Henkel Garcia serves as Treasurer, and Manny Hernandez serves as President and Chairman.
You can read the bio of all these individuals here:
You can watch a video of all the board members, so you may have a chance to meet them at least through the screen of your computer here:http://www.tudiabetes.org/video/meet-our-board-of-directors
Q: Is it OK for two spouses to be part of the board of directors of a nonprofit and be compensated staff members?
A: Yes. It is perfectly legal. However, according to California nonprofit public benefit corporation law, because two of the board members (Manny and Andreina) are husband and wife and are compensated for their services, they must comprise less than half of the Board. In other words, they cannot have majority vote.
Also, a compensation committee (made up by Henkel Garcia, Luis Garcia and Maria Luis O’Connell) was formed to determine the salaries of the paid staff. Under applicable nonprofit law, these salaries must be reasonable.
We have consulted with a nonprofit lawyer on this (and many other questions we’ve had) to help ensure we’re doing things right.
Q: Do DHF employees receive a salary?
A: Yes. All full-time and part-time staff members of the Diabetes Hands Foundation earn a salary paid by the organization (http://nonprofit.about.com/od/faqsthebasics/f/paystaff.htm). Volunteers serving the foundation are not paid for their work. Salaries (and any other required information) will be disclosed as the law requires.
Q: How does the salary of employees at DHF get determined?
A: There is a compensation committee of the board of directors. By policy, no full time employee of the foundation is allowed to be a part of this committee. The salary for the employees gets decided by combining information in salary surveys for comparable nonprofits in the Bay Area (California) for comparable positions and work, with what the budget of the foundation allows. Regardless of what the foundation budget allows, the law requires that all salaries paid be reasonable and not excessive.
Q: There are groups of members in TuDiabetes that are based on religion or faith, such as Christian Diabetics, Muslims Touched by Diabetes and Diabetic Jews. Is this legal?
A: This is absolutely legal. Actually, though not the case of the Diabetes Hands Foundation (we’re not a religious organization), churches and religious organizations are generally exempt from income tax and receive other favorable treatment under the tax law. Section 501©(3) specifically lists “religious” along with “charitable” and “educational” as permissible purposes for a tax-exempt charity.
Q: What websites does the Diabetes Hands Foundation ask for donations through?
A: The Diabetes Hands Foundation currently only runs two social networks, TuDiabetes.org and EsTuDiabetes.org. On both sites, it asks (or has asked) for donations.
Additionally, the foundation has a main web site at http://DiabetesHandsFoundation.org and runs the following blog to help us with our outreach efforts and support our fundraising efforts:
http://diabetesvlog.blogspot.com , http://tudiabetes.blogspot.com ,http://tudiabetes.tumblr.com and http://changediabetesnow.org. Last, the foundation currently has a Facebook page, a Facebook Cause, two Facebook groups, MySpace page,a YouTube channel and multiple Twitter accounts, through which we have asked for donations.
In the future, the foundation may request donations in other ways, through other sites, such as Facebook, etc.