Q. What should I think about and do before I partner with a cooperating association?
A. Ask yourself (and answer) some important questions.
- What do you want the association to do? Are these projects/programs that require outside resources?
- What would you like your project to look like in 5, 10, 15 years? What services would you like provided that are not provided now?
- Do you think an outside group could help you achieve this vision?
- Do you have (or are you willing to commit) time to develop a relationship with an association?
- Do you have division, district, project support for this effort?
- Are there people who can help you from the local community, other agencies, or other non-profits?
- Are there nearby Corps projects that can partner with you and share an Association
- Are there any businesses or other potential funding resources for start-up costs?
The first thing to keep in mind is that an association is a partnership. You are inviting a group of individuals to come into your project to share in implementing a combined vision. In other words, this is a two-way partnership -- there will be, and should be, benefits for both sides. The Corps may be expected to provide some level of support, at no charge, for a sales outlet at the project, locations for donation drop-boxes and staff assistance to be a non-voting advisory member to the board. The project may provide office space. In addition, the Board of Directors should be considered a partner in future planning for the project. Keep in mind that most Boards consist of community leaders and others who have committed their own time to achieving the goals of the project. They donate considerable time and energy and their interest must receive the highest level of respect from Corps staff.
Q. How is a cooperating association created?
A. See the Toolkit for Developing a Cooperating Association
Q. What are the benefits of a cooperating association at your project?
A.
- Associations can purchase materials, equipment, programs, exhibits, services, and publications to be used at the project. Adequate funds for these things may not be directly available to Federal agencies.
- Non-profit 501(c) status allows the association to accept tax-exempt donations from contributors, which increases their fundraising capability. Not all non-profits, including the federal government, have the same tax-deductible benefits to donors.
- Associations can develop an organized constituency not typically accessible to Federal employees that provide ongoing support for the project and the work of the Corps within the region.
- They can hire staff to assist with operating visitor centers, offices, recreation areas or in achieving other management goals.
- Associations can provide many direct benefits to visitors by doing things such as operating a bookstore, sponsoring special events, managing a campground, or developing new programs and projects that accomplish management goals.
- Associations are not subject to the Service Contract Act or Davis Bacon wage requirements.
Q. What is a foreign corporation?
A. When an association has to work in more than one state, it becomes a "foreign corporation" in any state other than the one in which it is incorporated. The purpose statements in the articles of incorporation need to be crafted so that the corporation can accomplish the goals for which the cooperating association guidelines were intended.
Q. Is a Real Estate instrument necessary when cooperating associations are using government property?
A. A Real Estate license may need to be issued, at no charge to the association, if the association intends to occupy fixed space in a government building, such as their own separate area for a bookstore or office space. However, if the association utilizes a rolling book cart, shared space, or otherwise has no permanently fixed facilities, an RE license is not necessary.
Q. Where can the IRS rules about non-profit (NFP) organizations and information on which NFP's have tax-exempt status be found?
A. IRS publication 557, "Tax-Exempt Status for Your Organization" discusses the rules and procedures for organizations that seek to obtain exemption from federal income tax. The Organization Reference Chart enables one to locate at a glance the section of the Code under which an organization might qualify for exemption. It also shows the required application form and, if an organization meets the exemption requirements, the annual return to be filed (if any), and whether or not a contribution to an organization will be deductible by a donor. It also describes each type of qualifying organization and the general nature of its activities.
Q. What is the Randolph/Sheppard Act and does it hinder a cooperating association from having concessions or vending machines at Corps facilities?
A. The Randolph/Sheppard Act (RSA) requires certain government agencies such as those under Department of Defense to contract through either the National Institute of the Blind and/or National Institute for the Severely Handicapped (NIB/NISH) for concession and/or vending machine opportunities at federally owned facilities. Under certain conditions and with proper approvals (e.g. from a state-licensing agency) cooperating associations can provide concessions or vending machines and still be in compliance with this Act. See "Lessons Learned" for more details.
Before your cooperating association is allowed to operate vending machines at Corps facilities, you should know the following:
- If vending machines are placed in federally owned facilities, preference must be given to licensed blind individuals or organizations. However, many Corps water resource projects are located in areas where these options do not exist. Therefore, it is necessary to check into the availability of NIB/NISH and document your findings before you provide vending opportunities to any organization or individual who is not from the NIB/NISH. Facilities built by a grantee under a lease are not federally owned buildings and the grantee may provide services within the privately owned facilities, such as marina snack bars or dockside vending machines.
- There may or may not be a state licensing agency for vending machines, so their approval could be required.
- It may be possible that a cooperating association would be required to share 50% of vending machine revenues with NIB/NISH organizations, if profits exceed $3,000; or they may need to give all proceeds to NIB/NISH if the vending machine provider is in direct competition with a NIB/NISH organization on the same premises.
- Vending machine operation must not be the major function of the cooperating association. The language in the sample agreement for associations in Appendix P of EP 1130-2-500 covers this type of activity.
Q. What is Unrelated Business Income Tax (UBIT)?
A. Many Cooperating Associations want to sell soda, film, snacks and other convenience items in their bookstores for their customers. Non-profit, tax-exempt organizations must pay taxes on income that does not relate to their exempt purpose or function. The IRS considers this to be UBTI and therefore the Association is required to pay taxes on that income by filing a Form 990-T "Exempt Organization Business Income Tax Return" at the same time as they file their Form 990 return. If they generate a substantial portion of their income from such activities, they could lose your tax exemption. While the IRS has never said exactly how much is too much, a general rule is that UBTI should not exceed 10-15% of total gross revenue. Your Association should consult a professional to help reduce the risks of losing their tax exemption. Consider this when deciding whether to approve such items for sale.
IRS Publication 598, "Tax on Unrelated Business Income of Exempt Organizations," covers the rules for UBIT.
