501c3

[This question about Friends of the Library and $$$ is from a municipal public library]

We have a newly re-organized Friends group that does not have 501(c)(3) status but would like to accept donations. I know that the library can act as a pass-through for grants but I was wondering if this also applies to undesignated monetary donations?

This issue—the question of a public library acting as a pass-through on an ongoing and open-ended basis for its Friends—is like a mouse seeking cheddar[1] cheese in a maze.

A local artist has asked for us to become a fiscal sponsor (act as a “pass-through” organization). Is this something a public library can do?

A "pass-through" is when a 501(c)(3) organization agrees to let a non-501(c)(3) use its tax status to accept grant money.  It’s a not uncommon arrangement; in fact, some 501(c)(3)’s are actually set up to do it so smaller and less established organizations can benefit from grant money.

I found some information that may indicate that association libraries which charge patrons for faxes should collect sales tax.

There's a lot going on in this question, so I am going to be less fun and flowery[1] than usual as I answer it.

I am sorry to report that per NY Tax Law Section 1105(b), an association library must collect sales tax on sales of facsimile services for faxes sent and received within the state.[2]

I work at a special district public library, and we are not currently a 501(c)(3). Everyone I've asked from co-workers to administration to board members says no, we aren't eligible, but no one can answer *why* we wouldn't be eligible. First, we pretty explicitly meet the exempt purposes set forth in section 501(c)(3).

In Greek mythology, the "chimera" is an intact, functioning animal boasting the features of other animals: the head of a lion, the body of a goat, and the tail of a serpent (or a dragon, depending on your source).

Libraries are legal chimeras.

We are a library that is a hybrid government agency (special taxing district) and a 501(c)3. Does being a 501(c)3 override local gov’t agency status as far as applying for the CARES PPP? We've reached out to several attorneys and even the SBA and we get opposite answers. Help!

I have spoken with many public libraries about their experience considering and applying for the different aid packages currently being offered in the wake of the pandemic.  I also have the benefit of working with an associate attorney who once worked for the SBA, closing disaster loans.

Is it legal for a Friends of the Library group to hold their funds and not to use those funds to support the library's mission? OR refuse to pay for library program and services when ask by library staff?
Can they lose their 501c3 status, if it is proven that the funds are not being used to benefit the library?

Before we address what may be the clear signs of a dysfunctional relationship between a library and its "Friends," let's explore the basis for the Library-Friends arrangement.

A member asked if there are any legal issues to consider when using GoFundMe to fund-raise, especially for association libraries.

The lawyer answers…

Fund-raising in the current climate (or any climate) is tough.  There are state and federal accounting rules, bylaws, “best practices,” and internal policies to abide by, while at the same time there is pressure to make sure the campaign is well-executed, fun, and most of all: productive.