501(c)(3) Bylaw Language

Instructions for amending your club bylaws to include
“Requirements to be Exempt as an Organization
described in section 501(c)(3) of the Internal Revenue Code”

Please note that both the purpose and membership statements of your bylaws must reflect the 501(c)(3) charitable and educational purpose of your organization. Contact Division Director of Communications and Affiliate Services the CGCI Group Exemption Chairman, Maryanne Lucas, if you have questions about this or would like some advice on revision.

In addition, the exact wording of the following article must be added to your clubs by-laws to include the requirements to be exempt as an organization described in section 501(c)(3) of the Internal Revenue Code. The five sections included in the article are all required to be included in the constitution/by-laws by the Internal Revenue Service: they include purpose, inurement, lobbying, notwithstanding, and dissolution clauses.

Article _____ (Please give this article a new number to add it to your constitution/by-laws)
Amendment to the By-laws

Requirements to be exempt as an Organization
described in section 501(c)(3) of the Internal Revenue Code

Section 1. Said organization is organized exclusively for charitable, religious, educational, or scientific purposes, including, for such purposes, the making of distributions to organizations that qualify under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code.

Section 2. No part of the net earnings of the organization shall inure to the benefit of, or be distributable to its members, trustees, officers, or other private persons, except that the organization shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in the purpose clause hereof.

Section 3. No substantial part of the activities of the organization shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the organization shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office.

Section 4. Notwithstanding any other provision of these articles, the organization shall not carry on any other activities not permitted to be carried on (a) by an organization exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by an organization, contributions to which are deductible under section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code.

Section 5. Upon the dissolution of the organization, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the organization is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes.

What does the required language mean?

Below is a brief and very unprofessional explanation of what each section means in common language.

Section 1: This paragraph promises that the club was formed with the purpose of being “charitable” or “not-for-profit.” The government approves several types of activities as “charitable.” “Education” is an approved activity that is most applicable to garden clubs. “Science” applies to a lesser degree. This paragraph promises that the majority of the effort put forth by the club will be educational and perhaps also scientific, as far as the science of gardening goes.

Section 2: This paragraph promises that the organization will not act to benefit an individual(s). In other words, no individual(s) will make money off this club. Members or others may be paid a “reasonable” compensation for services and expenses, but no one will personally profit (as in “get-something-for-nothing,” “skim money off the top” or charge unacceptable expenses to the organization

Section 3: This means that the major part of the clubs business will be for carrying on educational activities, but not activities of a political nature. Politics & promoting political candidates may not be a major activity of the club. Of course we all have freedom of speech in this country and we are not precluded from expressing our opinions. But to be a 501(c)(3) club, political posturing must to be kept to a very small part of the day-to-day business of the club.

Section 4: This paragraph is basically stating that this club will behave as the IRS, and the public in general, expects a non-profit club to behave.

Section 5: The IRS is giving a break to people who donate to your club. The government agrees to not charge the donor income tax on the amount of money given to your club. In effect, the government, itself, is giving-up the income it would have gotten off the taxes of the donation amount. So, the government rightly believes the money received by the club is “special.” (It wasn’t taxed.) Therefore, if the club decides to shut down, the government wants this “special” untaxed money to go to some other non-profit that has the same non-profit status [501(c)(3)] as your club has. If your club can’t find another non-profit to give its money to if/when it closes down, the government says it will take the money and distribute it for you. That’s the deal. After legitimate expenses, donated money must stay in the hands of approved non-profit organizations or it all gets turned over to the government and the government will see that it gets used for charitable purposes.

All very fair and reasonable.

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