Establishing a New Chapter
X

Establishing a new chapter

I. Establishing a New Chapter

Congratulations! You are considering starting a new chapter! Chapters are the lifeblood of our organization. What you are contemplating can make a real, substantive and positive impact on members in your area. Thank you for your effort!

Any ten (10) or more members of CAMFT (i.e. Clinical or Pre-Licensed members) may propose the formation of a Chapter. Proposals for a new Chapter shall be in writing, signed by the members making the proposal, and submitted to CAMFT’s Executive Director. The application for charter shall include:

a) designation of geographic areas including zip codes encompassed by chapter;

b) proposed chapter bylaws and a statement that the proposed chapter bylaws do not conflict with the CAMFT bylaws;

c) names of ten (10) or more CAMFT members who will become the charter members of the chapter; d) names of the proposed Chapter members who will be named as the initial board members and officers of the chapter;

d) resolution from the chapter board agreeing to abide by the CAMFT Bylaws, CAMFT Code of Ethics and the Chapter Agreement;

e) a dues schedule for the proposed chapter; and g) a statement that the chapter will limit voting chapter membership to members of CAMFT.

The application to start a new chapter should include the following: Items a-f above must be completed and submitted to the CAMFT executive director. If the documentation is complete the executive director will submit the request for charter to the CAMFT Board at the next regularly scheduled meeting (The CAMFT Board ordinarily meets quarterly).

If the application for a Chapter charter is complete, the Executive Director shall submit it to the Board for consideration at its next regular meeting, or as soon thereafter as reasonably possible. The Chapter will become effective upon approval by a 2/3 vote of the Board. The Board may deny a chapter application if the Board determines that the chapter is redundant or will unreasonably infringe on an existing chapter.

The official certificate of chapter, when granted by the CAMFT Board of Directors, will be mailed to the new chapter president. The charter of the newly formed chapter will be recognized at the next chapter lunch at the annual conference.

While CAMFT’s Bylaws govern all activity pursued by the association, each chapter, as a legally separate non-profit entity, is required to have a set of its own bylaws as well. Chapter bylaws provide a blueprint for how the chapter operates. It provides rules and procedures for such topics as election and voting, composition of the chapter Board of Directors, and when and how meetings should be conducted.

Chapters are bound by both the state CAMFT bylaws and their own. As a result, while chapter bylaws can go above and beyond those of CAMFT and include guidelines not specifically addressed by CAMFT bylaws, they cannot directly contradict CAMFT bylaws.

The section of the CAMFT bylaws that addresses chapters is Article XXII. When writing or amending your chapter bylaws, please keep in mind that the provisions of this article cannot be contradicted by your chapter bylaws.

ARTICLE XXII

CHAPTERS For the mutual benefit of all, for the advancement of marriage and family therapists, and in order to further the objectives of CAMFT, the Board of Directors may charter groups of marriage and family therapists on a geographical basis as chapters of this Association. The Board of Directors shall have the power to establish such terms and conditions regarding the formation of chapters as it considers desirable. The Board of Directors shall have the power to revoke the charter of a chapter when the Board of Directors determines that the chapter is not operating in the best interest of CAMFT.

Each individual chapter shall limit its Board of Directors in the following manner:
A chapter’s Board of Directors shall be comprised of no more than thirty-five (35) percent of associate members or pre-licensed members of the Association who are entitled to vote on matters submitted before the chapter’s Board of Directors.

Such members shall not serve as President, President Elect, or Past President. In case of necessity, a chapter may request a variance from the CAMFT Board of Directors if the above provision is not achievable. Such request is granted solely for a one year period. The chapter may make a separate request to the CAMFT Board of Directors should the necessity arise for a variance in any subsequent year.

Any chapter established pursuant to this article shall be a separate and distinct legal entity from CAMFT and from other chapters, and shall be solely responsible for the conduct of its own activities and affairs. CAMFT shall not be responsible for any debts, liabilities or other obligations of any chartered chapter.

 

Becoming a nonprofit and becoming tax-exempt are different processes, carried out by different government entities. The granting of nonprofit status is done by the state, while tax-exemption is granted by the federal government in the form of the IRS.

Q: What is a nonprofit?
A: A nonprofit organization is any organization for which those who control or support it do not earn a profit. This doesn't mean that a nonprofit can't make a profit--quite the contrary is true. A nonprofit organization can produce goods and services, and it can earn a profit while doing so. It can even invest those profits (in the stock market, for example) in hopes of earning more money. However, all of the money made must go back into the organization - there is no "profit sharing" among members. Generally speaking, these organizations don't have any owners.

Individual states, and not the federal government, grant official nonprofit status. However, if your chapter want to apply for tax-exemption by the state or federal government, you must first be recognized as a nonprofit- either a nonprofit corporation or an unincorporated association.

Q: Why should my chapter be a nonprofit corporation instead of remaining unincorporated?
A: An association or organization can choose to incorporate and become a legal entity, or can remain an informal, unincorporated association (also called a voluntary association or organization). CAMFT encourages all chapters to incorporate. When an organization incorporates, it becomes its own legal business structure ─ set apart from the individuals who founded the business. This has important legal benefits. If your chapter remains an unincorporated organization, your chapter leaders do not enjoy limited liability and may be sued individually if the association authorizes or participates in an activity that results in injury or harm to someone, has an unpaid debt, or does something that may cause legal action. Since there is no legal entity to sue, the leaders get sued as individuals. Incorporating is one of the best ways chapter leaders can protect their personal assets.

Other disadvantages of being an unincorporated association include the following:

  • Banks, vendors, and landlords typically will not extend credit to or enter into contracts with you if you are not a legal entity.
  • Without formal organizing documents required in a corporate structure – articles of incorporation, charters, or bylaws – chapters members may get confused or argue about what they should be doing and how they should be doing it.

Q: What is the difference between a 501(c)3 and 501(c)6 nonprofit corporation? Which is the right one for my chapter?
A: chapter may incorporate either as a public benefit (501c3) or mutual benefit (501c6) corporation. The primary distinction between public and mutual-benefit nonprofits is in their treatment by the IRS. Section 501 of the federal tax code classifies nonprofit entities and establishes two benefits for which nonprofits can qualify: tax exemption and tax-deductible donations. Both public and mutual-benefit nonprofits can apply and qualify for tax exemption, so they won't have to pay federal income taxes on revenues. However, only public-benefit corporations, classified as charitable organizations by the IRS, can apply and qualify under section 501(c)(3) of the tax code to receive tax-deductible donations. Charities rely on this provision to raise money from the public to support their activities. Meanwhile, mutual-benefit nonprofits typically raise money by charging annual dues, which are paid by members.

CAMFT is a 501c6 corporation and encourages chapters also incorporate as 501c6. The primary reason is that a 501c6 corporation does not have restrictions on political campaigning or lobbying. With the importance of advocacy to the goals of CAMFT, it is important to keep the avenue for political activity open.

OTHER DIFFERENCES BETWEEN 501(C)CATEGORIES

Categories 501(C)3 501(C)6
Primary Purpose Organization must serve the general public and the members of the selected industry. Organization must provide benefits to members of the industry, not necessarily the needs of the general public.
Charitable Contributions Yes, organization may accept charitable contributions No, organization may not accept charitable contributions
Limits on Lobbying Expenditures Yes, organization has limits on lobbying expenditures No, organization does not have limits on lobbying expenditures
Political Campaign Restrictions Yes, organization has restrictions on political campaigning No, organization does not have restrictions on political campaigning though campaigning cannot be their primary activity
Income-Support Restrictions Yes, organization has restrictions on how much of its income can be unrelated business income Yes, organization has restrictions on how much of its income can be unrelated business income
Subject to Unrelated Business Tax Yes Yes

Compiled by the Nonprofit Resource Network, 2008

We’ve already learned the major distinction that applying for nonprofit status and applying for tax exemption are two different processes. Nonprofit status is granted by the state of California and may make a chapter eligible for certain benefits, such as state limited legal liability.

Tax exemption status is also distinct from incorporation status. While incorporation is usually the first step to obtaining tax-exempt status from the IRS, your chapter can apply to the IRS for tax-exempt status without first incorporating (choosing to remain an unincorporated nonprofit association). However, due to the benefits of incorporation as discussed above, this is neither the norm nor recommended. It is also possible to be an incorporated association without seeking tax-exempt status from the IRS.

Neither organizing as a nonprofit at the state level nor incorporating the nonprofit will automatically grant the chapter exemption from federal or state income tax. To qualify as exempt from federal income tax, a chapter must meet requirements set forth in the IRS and must file a form with the IRS. To qualify as exempt from state income tax, a chapter must file a form with the California Tax Franchise Board.

Q: What are the procedures for obtaining exemption from federal income tax for my nonprofit chapter?
A: To apply for recognition by the IRS of exempt status under section 501(c) of the Internal Revenue Code, most organizations use Form 1023, Application for Recognition of Exemption. (Organizations applying for recognition of exemption under a provision other than section 501(c)(3) generally use Form 1024. The application must be complete and accompanied by the appropriate user fee. A step-by-step review of what your chapter needs to know and to do in order to apply for recognition by the IRS of tax-exempt status, as well as frequently asked questions about applying for exemption are available on the IRS website.

The chapter should also request an employer identification number, even if it does not have any employees. Please use IRS Form SS-4, Application for Employer Identification Number, and its instructions to learn how to obtain an EIN. The form and its instructions are available online on the IRS website.

Q. What are the procedures for obtaining exemption from state income tax for my nonprofit chapter?
A. The procedures for being recognized as exempt from California income or franchise tax by the California Franchise Tax Board are similar to those for the IRS. California FTB Form 3500 must be completed and submitted to FTB. The FTB will notify the applicant of its decision on exempt status, and also send instructions for annual filing of FTB Form 199 (more on this form below).

Q: What are the ongoing federal reporting requirements for my tax-exempt chapter?
A: IRS Form 990
If a chapter has filed for tax-exempt status with the IRS, even though the chapter doesn’t pay taxes, it is still responsible for annual reporting via IRS Form 990. This form allows the IRS and the general public to evaluate the chapter’s nonprofit operations. It also includes information on the chapter’s mission, programs, and finances.

The type of Form 990 to be filed by a chapter depends on the filing year and the chapter’s gross receipts. The different versions include Forms 990, 990-EZ and 990-N.

Please reference the chart below to determine which form is the correct choice for your chapter:

Status Form to File
Gross receipts normally ≤ $50,000 Note: Organizations eligible to file the e-Postcard may choose to file a full return 990-N
Gross receipts < $200,000, and
Total assets < $500,000
990-EZ or 990
Gross receipts ≥ $200,000, or
Total assets ≥ $500,000
990
Private foundation - regardless of financial status 990-PF

Your chapter’s Form 990 is due on the 15th day of the 5th month after the end of the organization’s taxable year. This means that if your chapter follows the calendar year (January 1 – December 31), your Form 990 would be due on May 15th of each year.

If a due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. The table above does not reflect the additional day.

The form and its instructions are available online on the IRS website.

Q: What are the ongoing state reporting requirements for my tax-exempt chapter?
A: Form SI-100

Form SI-100 is a one-page informational form that asks for information about corporate officers, processing agents, and addresses. It is based on incorporation date and required only every other year. The form must be filed within 90 days after an organization initially files its articles of incorporation in California and biennially (one every other year) for each filing period thereafter during the applicable filing period. The applicable filing period is determined based on the month in which the articles of incorporation were initially filed. It includes that month and the preceding five months. For example, if ABC Chapter filed its articles of incorporation with California on August 15, 2016, the chapter would have 90 days from that date to file an initial SI-100—making the initial filing deadline November 13, 2016. ABC Chapter would then have to file SI-100 again by August 15, 2016, or during the preceding five months. SI-100 can be filed electronically via the California secretary of state Web site, which also provides additional information about the form.

A: Form RFF-1 (ONLY if your chapter is tax-exempt as a Section 501c3 charitable organization)

All California charitable nonprofits (except governmental agencies, religious organizations and some political action committees) must annually file Form RRF-l with the Attorney General’s office Registry of Charitable Trusts. This report is due the 15th day of the 5th month after the end of the organization’s fiscal year.

A: Form 199N

Organizations with gross receipts that are normally equal to or less than the threshold (3-year average gross receipts of $50,000 or less) are not required to electronically file the California e-Postcard, or Form 199N. Organizations that meet the requirement to file the California e-Postcard may choose to file a complete Form 199. If a chapter’s three year average gross receipts exceeds $50,000, then it must file the Form 199.

A chapter must file the California e-Postcard on or before the 15th day of the 5th month after the close of your organization’s tax year. For example, if your tax year ends on December 31, the due date is May 15. If the due date falls on a weekend or state holiday, file by the next regular business day.

**Chapters who choose not to obtain their own tax exempt status must pay taxes as appropriate for their organizational structure.

  1. Familiarize yourself with the information listed on our website titled: Establishing a new Chapter www.camft.org/Resources/Chapters/Chapter-Playbook
  2. Determine geographic areas including zip codes and contact CAMFT to see if these areas are still available
  3. Contact an attorney to draft proposed chapter bylaws and a statement that the proposed chapter bylaws do not conflict with the CAMFT bylaws;
  4. Contact an attorney to assist with nonprofit and tax exempt status applications
  5. Decide between nonprofit corporation or unincorporated association
  6. If incorporated: Decide between public benefit (501c3) or mutual benefit (501c6) corporation (CAMFT is a 501c6 corporation and encourages chapters also incorporate as 501c6)
  7. Apply for Non-Profit status
  8. Name ten (10) or more CAMFT members who will become the charter members of the chapter
  9. Determine who will be named as the initial board members and officers of the chapter
  10. Prepare a resolution from the chapter board agreeing to abide by the "CAMFT Bylaws, CAMFT Code of Ethics and the Chapter Affiliation Agreement
  11. Determine dues schedule for the proposed chapter
  12. Prepare a statement that the chapter will limit voting chapter membership to members of CAMFT.