Financial Structures

By: Ben Dreyfus

(Note: most of the information in this article is specific to the United States. People in other countries should research their own country’s laws and regulations. Even in the United States, page this is not professional legal advice and was not written by a lawyer.)

Many havurot/minyanim (even some of the largest ones) begin in someone’s living room. And some minyanim/havurot, cialis 40mg if they stay small enough, sick can stay there for years. And it’s possible to sustain a fully functioning havurah or minyan with no ongoing expenses: the community meets in participants’ homes, the food is potluck, the siddurim (prayer books) are bring-your-own and/or donated, Torah is not read (e.g. for a Friday-night-only community) or a Torah scroll is borrowed, etc.

But what happens when your minyan or havurah reaches the point when it needs to incur significant expenses? This happens most frequently when a community becomes too large to continue meeting in homes, and needs to rent space for services and other activities. This necessitates a more formal financial structure, so that many participants can chip in toward the community’s expenses and make tax-deductible contributions to the community. Here are some options:

OPTION 1: FIND A FISCAL SPONSOR

This option means that the havurah or minyan doesn’t have to go through the incorporation process itself, but finds an existing nonprofit 501(c)3 organization to become its “fiscal sponsor”. People can then make tax-deductible contributions to the sponsoring organization and designate these contributions for the minyan or havurah. The sponsoring organization keeps the havurah or minyan’s funds separate from its own funds, and the minyan or havurah can spend these funds. This often requires the havurah or minyan to pay some percentage of the donations it receives to the sponsoring organization in exchange for this arrangement. More information about different types of fiscal sponsorship can be found here (and on other pages it links to).

OPTION 2: INCORPORATE AS A “CHURCH” OR “RELIGIOUS CORPORATION”

In order to open a bank account for your minyan or havurah (rather than using someone’s individual bank account for the havurah or minyan’s finances, or going through a fiscal sponsor), you’ll need to incorporate. The bank will ask for a copy of the incorporation papers when you open the account. There are several ways to do this.

The actual incorporation happens at the state level, and the laws in each state are different. You will most likely incorporate in the state where your community is located. Many states have a category called a “religious corporation” or something similar. For further information on this process, look up your state’s incorporation requirements. This will often require submitting the names of your board of directors, a set of bylaws, and a fee on the order of $100. To avoid reinventing the wheel, it may be helpful to talk to other havurot or minyanim in your state that have already gone through this process.

The IRS recognizes a special category for “churches,” which are exempt from paying income taxes, and can receive tax-deductible contributions. Churches are automatically eligible for 501(c)3 tax-exempt status and are not required to apply for recognition as a tax-exempt organization. (However, you may still have to pay sales tax in your state or city.) Of course, this means that you are bound by the laws concerning tax-exempt organizations; for example, you may not endorse political candidates. See the IRS page [PDF] for more tax information about churches.

OPTION 3: INCORPORATE, AND APPLY FOR 501(c)3 STATUS

If your minyan or havurah does not qualify as a “church” (for example, if its primary programming is not religious services), you can incorporate in your state as a not-for-profit corporation, which is generally a similar process to the one described above.

To apply for 501(c)3 status, fill out IRS form 1023 [PDF]. This requires a fee of $300 (if your annual gross receipts are less than $10,000).

Even though 501(c)3 organizations are exempt from paying income taxes, you may have to fill out IRS form 990-EZ [PDF] each year and report on your organization’s income and expenses if your gross receipts exceed $25,000 per year. (The full form 990 is required if your gross receipts exceed $200,000 per year.) The form 990 is considered a public document, and you will be required to make it available to donors or anyone who requests a copy. The Guidestar website is a good place to learn more about how to maintain your havurah or minyan’s  public financial records and also to find information about other similar organizations or other non-profit organizations whose work you support.

Ben Dreyfus attended his first NHC Summer Institute as an Everett Fellow in 2002, and was co-chair in 2006. He is on the NHC Board of Directors.