We’re On Our Way to 501(c)(3)!

We have some very exciting organizational news to share (and maybe a few myths to bust, or at least clarify)!

On Thursday, April 22nd, Highwire Improv formed its initiating board of directors, officers, and adopted our initial bylaws. Then on Saturday, April 24th, we submitted Form 1023, the application to become a Tax-Exempt Non-Profit organization (under the United States Internal Revenue Code). In the next 3-6 months, we’ll find out if that application was accepted, as well as our status as a Public Charity.

If that all sounds confusing… well it is. Let’s walk through it all for a little bit of organizational transparency.

*all of this is information and explanation for a general audience, and is not legal, tax, financial, or business advice

What is a ‘Non-Profit’, Why Do I Care and What is Highwire’s Board Going to Do?

There is a lot of imprecise language that gets thrown around when talking about non-profit organizations! The details vary state by state, but the two most important ideas related to non-profits are:

1. The activities of the organization have to be for the public good in some way (which encompasses a very wide range of things from churches to hospitals to investment organizations, to schools, to improvisational theater companies like Highwire).
2. The income, profits, and assets of the organizations have to be handled certain ways to ensure that they too are for the public good (in the form of investing in the activities of the organization, or in rules like not allowing profits to funnel directly to the board, or that if a non-profit dissolves, it’s remaining assets have to be given to another non-profit or an approved government body). It’s not that a non-profit can’t take in profit, it’s that those profits can’t go to the directors of the organization.

If non-profit were an improv input (A), I’d guess that the first thing that makes people think of (B) is tax deductible baby. But it actually takes a few steps – just like Michael Scott couldn’t just declare bankruptcy, a non-profit is not afforded tax-exempt status just by existing!

First, a group has to become an actual organization recognized by the government! Highwire Improv did this by filing Articles of Incorporation in the State of Maryland on the 20th of October, 2020. This sets up the most basic infrastructure for having a company and let us do things like get a bank account.

Next, we had to setup a board of directors and adopt bylaws. These steps give the government confidence that the organization has rules in place to appropriately conduct activities and manage assets in accordance with the requirements of the tax code. The specific requirements are relatively light – you must have a board of directors, certain officer positions, and certain types of clauses in the bylaws, again focused on the two main ideas above. Organizations have great latitude in exactly how expansive and detailed their bylaws are.

Our bylaws intentionally focus on just the legal framework needed to obtain non-profit status. Our plan is to create a second board-like group that will oversee operations and strategy. We think that by focusing on the committees we originally set up as well as adding new ones over time, we can develop community governance that will make Highwire thrive.

In line with this our first board meeting (minutes here) consisted solely of electing four officer positions and adopting the bylaws above. We don’t expect to convene the board often at this time, instead having the majority of day-to-day operations managed by the committees, and in future, paid employees.

Then, we had to take those bylaws, the answers to a bunch of questions about what we plan to do as an organization, and $600, and send them to the U.S. Government with Form 1023. With the submission of that form we can rightly say that our 501(c)(3) tax-exempt status is pending!

Now, we wait. It takes a while (even if you pay to expedite, which we did not) to hear back. Anywhere between 3-6 months! But, there’s good news – our 501(c)(3) status can be utilized now (and actually retroactively applies back to our incorporation date – 20th of October 2020 if you haven’t been taking notes). So we get to start doing the good stuff!

What good stuff? Well, tax-exempt status opens up three really important things:

1. Highwire becomes exempt from income taxes on activities related to our non-profit purpose (like improv shows and classes)!
2. Donations to Highwire Improv become tax-deductible for both individuals and organizations (which is a good motivator for donations).
3. Many grant programs become open to Highwire!

OK – that’s enough organization talk – reach out if we got anything wrong or if you have any questions!