[HamWAN PSDR] Quarterly Board Call

Mon Apr 4 10:11:26 PDT 2016

Tony,

Actually no, but your note did put me back into the RCWs and WACs which turned out to be a good thing.

In specific answer to your question, WAC 314-40 applies more toward private clubs organizing as a non-profit and deals with specific items such as guest/member/visitor status, retail operations, liquor, concessions, etc.  Think more of perhaps an Eagles club, private card room, etc.   

The actual guiding legislation is WA RCW 24.03.  Additional information regarding finance issues such as exemptions and deductions for B&O and other taxes can be found in WAC 458-20-169.  Additional information can also be found on the Secretary of State’s website, but it also roots back to RCW 24.03.  Many other WACs and RCWs are called out depending on what additional classification(s) your organization or Its operations fall under.  On the Federal side, IRS Code 501 provides additional requirements if you wish to operate with the benefits afforded under sections such as 501c3.

The most basic pieces begin in WA RCW 24.03 – definitions.  Limiting things to the current topic, items (2) and (4) identify the “Articles of Incorporation” and “Bylaws” respectively.  Although an organization may have a “Constitution” at its root, “Constitution” is not defined or used anywhere in RCW 24.03.  There are references elsewhere and it is not uncommon that an organization wishing to legally incorporate will use elements of their constitution in their filed Articles of Incorporation or Bylaws.

The Articles of Incorporation are pretty standard and require minimal organizing information.  The WA Secretary of State’s online form is found here - http://www.sos.wa.gov/_assets/corps/forms/NonprofitArticles2014.pdf

The Bylaws are not required to be filed, but they ARE required to exist.  The Articles of Incorporation establish the legal identity and persons responsible for the organization.  The Bylaws identify how the organization conducts itself with respect to “regulation and management”.  

This is where part of the current confusion lies.  At the moment HamWAN only has a Constitution published.  The current constitution is not structured properly to serve as either the Articles of Incorporation or a set of Bylaws.  Both are required.  Because HamWAN exists as a legal entity and is able to be found on the Secretary of State’s website, the Articles of Incorporation exist.  The situation with the bylaws is less clear.  If the current constitution is viewed to be the current set of bylaws for HamWAN, then all of my previous email content applies.  The bylaws dictate how an organization will conduct business and addresses such things as financial policy, officer responsibilities and limitations, conflicts of interest, dissolution, committees, appointments, and many other aspects.  It depends on the organization as to what elements apply and are contained within their bylaws.

In the earlier discussion, the current HamWAN Constitution is published as the governing document on how the group will manage itself – i.e. – in absence of an actual set of bylaws, this is all that exists.  The ONLY tool this “constitution” provides the organization for finance is that any expenditure over $100 requires a vote.  It does not discuss budgets or other tools or mechanisms that a normal set of bylaws would.  Administratively, the board is adopting a budget that (by absence in bylaws) it does not even have the power to do.  This is further complicated in that the organization the spending limits in the budget are in direct conflict with the ONLY piece of financial related published “policy” that exists – not in a required set of bylaws but in the Constitution.

To be sure, this is a lot of time and energy into what in many respects seems to be a hair-splitting exercise, but it is an important one.  A lot of people look at being a non-profit simply to receive donations without having to pay taxes on them.   This is definitely a benefit but it is not without responsibilities.  Responsibility #1 is to spell out how you will regulate yourself and conduct business.  If you operate contrary to that, you risk losing your non-profit status.  Worse – you risk losing donations and member or public trust if there are ever questions of management or financial impropriety.   At the moment we are nowhere near those situations but the current issue highlights something that we should take the opportunity to fix.  

A good set of bylaws will go a long way toward eliminating discussions like this for every topic that happens to come up.  The bylaws spell out how it will handle itself and most are structured to do a good job of it.  Bylaws protect the organization, the officers that run it, and the members that support/believe in it.  

There is a very nice handbook that is somewhat of a “user’s guide” of sorts that Washington State publishes called the “Washington Nonprofit Handbook” and it can be found at http://www.sos.wa.gov/_assets/charities/Washington%20Nonprofit%20Handbook.pdf.   While it does not address creating Bylaws, it does touch on a few other important topics:

·      Chapter 10:  The importance of Acting Like a Corporation

·      Chapter 11:  Function and Authority of the Board of Directors

·      Chapter 15:  Annual Reporting Requirements

·      Part IV:  4 Chapters on 501(C)(3) 

·      Part VIII:  7 Chapters on taxes that apply and do not

The following website gives examples of common pitfalls to avoid in creating Bylaws: 

https://www.venable.com/SnapshotFiles/a9acafa5-11aa-4faf-ad88-e49127f6cef2/Subscriber.snapshot?clid=c2d1036d-648d-4bf6-9ef1-4e6f4e391844. 

One of the key pieces that applies is Item #9 – Reserve the details for policies, not bylaws.  

The bylaws usually dictate the “big picture” items – how voting happens, officer responsibilities and limitations, dispute resolution, and granting authority and structure to how finances are managed.  The bylaws will often dictate that the board (or treasurer or sub-group) is required to make a budget annually, but the details of how budgets, audits, or other processes are handled are left to the organization’s policies.  Policy updates do not require bylaw amendments.

In closing Tony, you are correct to point out that there are differences by state.  Typically those differences are on the regulatory or tax side of the equation.  Some benefits are allowed to non-profits or other corporations that are organized within that state that are not permitted to “foreign” or “out of state” entities.  The organizing fundamentals such as bylaws are more universal in nature, but state law DOES need to be reviewed when bylaws are created to ensure they are not in opposition.  There are also numerous online sources that highlight some of those issues as well – Home Owner Associations (HOAs) are an example of this.  

Ok, I’ve killed more than enough virtual trees.  Hopefully this was of value to someone somewhere.

Cheers,

Rob Salsgiver – NR3O

From: PSDR [mailto:psdr-bounces at hamwan.org] On Behalf Of Tony Ross
Sent: Sunday, April 03, 2016 11:05 PM
To: Puget Sound Data Ring <psdr at hamwan.org>
Subject: Re: [HamWAN PSDR] Quarterly Board Call

On 04/03/2016 09:16 PM, Rob Salsgiver wrote:

... If you look at sample bylaws at  <http://inn.org/about/legal/bylaws/> http://inn.org/about/legal/bylaws/ in section 4.04 you will see the following: ...

$ whois inn.org
...
Registrant Name: Kevin Davis
Registrant Organization: -
Registrant Street: 17514 Ventura Blvd #103
Registrant City: Encino
Registrant State/Province: California
Registrant Postal Code: 91316
Registrant Country: US
Registrant Phone: +1.8185823533
...

I'm sorry that I don't know the extent of the local HamWAN organization, but wouldn't (Washington Administrative Code) WAC Chapter 314-40 be more applicable?

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