Private event to reserve a machine?

I would only agree it was not excellent if someone else needed it during that time, asked, and was told no.

I have scheduled rooms for classes and been approached by people and asked to swap rooms or change schedules. In every case we were able to accomodate everyone.

Did anyone else need the room? Was the person asked if they could accomodate the need?

Just using a resource a lot is not nescessarily a problem. If it were then why do we allow Printrbot to use the HAAS so much. Given their usage I would guess they exceed the hours on the machine of the next several top users.

But I know they work with others to ensure everyone gets accomodated.

@Tapper your wrong on several key issues.

Inurement involves the improper benefit to officers and directors of the non profit. If any member can receive the benefit, then by definition it is not enurement for normal members. The only normal members who might be involved in enurement would be those with relationships to officers or directors.

The issue about members making money is also fundamentally wrong. Yes they are expected to pay taxes on their income, but their failure to do so has no impact on DMS, especially since DMS has no way to know if they do or don’t.

This has been covered, if DMS pays the member for anything other then a reimbursement they need a W9 and to report to the IRS. For everything else it is none of DMS’ business.

There is no more issue with the IRS with a member using an unused room for a business meeting then there is for Printrbot to use the HAAS for the production of their printers.

1 Like

IANAL (or CPA), but I’m not sure that statement is 100% correct:

However, any transaction between an organization and a private individual in
which the individual appears to receive a disproportionate share of the benefits of
the exchange relative to the charity served presents an inurement issue.

Page 3 here: https://www.irs.gov/pub/irs-tege/eotopicc90.pdf

Overall I don’t have a strong opinion and I’m not sure if inurement is taking place etc., but I think it’s more than just officers.

1 Like

The events in question were mine.

At no time did I specify any association with any committees.

I did not reserve any tools or machines.

We brought our own sewing machines, steam irons, circle cutters/cutting mats, etc. (One Sunday I did forget my iron so I was using the one from CA, and it was passed back and forth as needed between myself and other members as needed with no issues.)

If there had been an issue with others needing the room for a class, we would have happily worked with
them to rearrange our reservations.

At no time was I approached for any discussion on this issue prior to the cancellation of the reservations. The events were simply canceled, and I was informed of this after the cancellations had taken place.

2 Likes

It is not 100%, but that is because the IRS doesn’t completely define inurement and instead relies on findings of fact for specific cases. Which translates to we will tell you it was inurement after we charge you.

That said, you will find additional information including a statement that most findings of inurement have centered around individuals with the authority to direct the spending in the document you cite.

A particularly relevent portion of that document is a court case where inurement was found to have NOT occurred. A non profit hospital hired a imaging doc who negotiated a cut of the profits for the use of the imaging machine as part of their compensation… No inurement.

There have been too many replies in this topic to address them individually, thus I will simply respond in general with the following.

Background
The Dallas Maker Space is a 501©(3) non-profit organized under the educational purpose in the tax code; as such our activities and policies should support this purpose. We also are granted tax-exempt status because we provide this educational mission to the larger community outside of our membership.
Education at DMS occurs in 3 general ways:

  1. Structured classes under our honorarium process that teach to an objective
  • Structured events outside of our honorarium process that typically perform some form of practical exercise
  • Non-structured learning at DMS via use of our facilities and resources to self-teach, perfect, and maintain skills

We prioritize access to the facility in that very same order. Because you must be a member to access the facility for the 3rd form of learning, it is the least priority.

We limit access to classes, events, and equipment under numerous conditions that we presume to be reasonable – members only for dangerous power equipment (without which DMS might face legal liabilities and because we have to fund our operations in order to sustain the organization), requires prerequisite or demonstrated competency for reasons of safety or foundational skill, participant must provide tools or materials, provide fees to DMS to cover consumables or equipment depreciation, etc.

On an organizational level, DMS is not what it was 6 months, a year, 2 years ago, etc. We presently occupy a space roughly triple in size what Ladybird was, have about quadruple the membership, and our structured educational offerings have grown nearly exponentially from a handful of times a month to dozens of times per month. We simply cannot operate the way we did in the past – resources are sufficiently scarce and we’re large enough to attract increasing regulatory scrutiny.

I remain opposed to reserving work areas or tools (hereafter referred to as private events) because it is the sensible, responsible way to administer DMS. Allowing private events is inefficient, contradicts our principle as a community workshop, and I believe it constitutes private inurement.

Efficiency
Allowing private events is a waste of our resources.
Resources that could benefit other members or the community at large are instead dedicated to a single individual and perhaps their invited friends. If private events become commonplace, resources might be blocked out for an increasing percentage of the time because someone wants to production-line a bedroom set, completely rebuild their automobile, consume the entire workshop in order to perform final assembly on an experimental aircraft, or the common room all weekend for a LAN party, or any other imaginable scenario.

Private events can also prevent legitimate structured events from occurring because they are occupying the resource for an individual and their select friends during a time when an actual structured event might occur.

Both of these scenarios could significantly hurt DMS’s ability to attract and retain members in the short term and threaten our survival in the long term.

I’ve heard multiple people describe the failures of a reservation system that 3D fab experimented with in the past. No-shows and late arrivals were common during reservation windows, with the latter causing tension when they ran into the next window – reserved or otherwise. The printers would sit idle for hours while people actually in the building waited for no reason.

A Community Workshop
Allowing private events violates the first-come-first-serve principle that’s embedded in our culture.

Private events deny others the ability to use resources that also made the effort to come to DMS. Most of us come here to do more than just knock out a project by working in a space for X hours nonstop without anyone else around; far from it – the surprise interactions are socially rewarding, result in unexpected learning, and enrich us all.

If private events become commonplace, this community would be threatened if not beaten down severely. One can envision resources booked defensively much of the time just to ensure availability for single people. Conversely, if you need to make some furniture and the tablesaw is booked all hours between 6 AM and midnight for the next two weeks, why bother showing up?

Private Inurement
Allowing private events confers a benefit on whoever booked the event.

Under the first-come-first-serve principle of a community work shop, everyone has roughly equal access to our resources. This informal system generally works out that we can use the tools we need.

A private event confers exclusive access to resources, something not normally available in a community workshop. If you don’t think this is valued in the market, I suggest trying to rent a workspace and populate it with tools for the cost of that time period’s membership dues. I believe that you will find such exclusivity is worth a staggeringly large multiple of what membership dues cost at DMS.

Complimentary to this exclusive access is that you are denying other members access to said resources and potentially diverting DMS resources from its educational mission.

While the common examples of private inurement do center around embezzlement, money-laundering, and classic conflicts of interest by non-profit managers and employees, these are not the limits of the definition. Guidance on the subject instead defines actions of “insiders” who are simply related to the organization in any way and can influence it to their benefit at the detriment of its mission.

Some concerns have been expressed about some members profiting from the work they do at DMS. While this is of legal concern for a non-profit such as DMS, our stance is that it is incidental to the nature of our mission and tracking it would represent an onerous administrative overhead. To a regulator, private events to reserve resources can certainly look like for-profit production: students or hobbyists generally have flexible schedules and benefit from collaboration with one another. Records of these events in the past and into the future will demonstrate that we do indeed have a reasonable ability to track and prohibit for-profit use of our resources.

The Solution
DMS should not allow private events. Allowing private events has far more downsides to how DMS functions than prohibiting them. Almost all actual and hypothetical examples of private events were either inappropriate for our mission or can occur quite smoothly without exclusive access to DMS resources. We can also prohibit private events without exhaustive definitions of what constitutes structured events vs private events.

4 Likes

Alright, I got all bucked up and wrote an opposing response, but the truth is that you’re probably right. Disallowing events that aren’t open to the public is probably a decent policy at this stage in DMS development.

After doing some reading though, I believe that your inurement argument is flawed, but not the way you’d think. Either way, ensuring that scheduled events are open to the public is probably a good way forward.

2 Likes

Very well said, Eric. As a point of clarification, and more one of semantics is Public vs Member vs Private. I do think it’s absolutely necessary that we continue to have the option of limiting classes to members only (HAAS class for example).

I’ll again state what I believe to be a common sense lower limitation, in that a resource may not be reserved for fewer than the minimum number of people who are required to receive an honorarium.

Researched, considered, and rendered like a Director.

And given that you liked his post above, @ESmith should consider this as a compliment.

So this brings us to how are you’ll planning on defining private events. From what I remember of @Hardsuit event description the event was for some form of costuming group. It didn’t seem as is they were banning anyone else, just organized around their group

Are we now going to prevent DPRG from reserving rooms for their private events?
What about @MellissaRhodes womens cosplay group meetups.

Sorry, but to my mind I fail to see the difference between those private groups and the one Paul was related to that prompted this thread other then frequency. As I said, the proposed rule is poorly defined and will lead to further arguments and conflict, I strongly suggest that if it is felt to be needed, then it be written in clearer more defined way prior to voting on it.

The fact is that we have multiple members who run either all or a portion of their businesses with the resources they have available to them as members of the space. Since the primary purpose of the space is to provide a communal workshop (as illustrated by the fact that is how most of our revenue is generated and most of our expense are directed for), this is hard to debate.

Indeed, we have (or had) a wall to highlight those members who launched succussful commercial enterprises in relation to the space and presumably with resources from the space… The Kickstarter wall.

[quote]
Records of these events in the past and into the future will demonstrate that we do indeed have a reasonable ability to track and prohibit for-profit use of our resources.[/quote]

Not sure who has given you the idea that a lack of records provides any protection, indeed we maintain many sources of potential records to provide evidence of the use of our facilities for commercial purposes; the Kickstarter wall, this forum, the various mailing lists and electronics forums.

Finally, I think it likely that our non-profit status is a house of cards. Education is clearly and demonstrably NOT (It was the fourth listed mission in the creation documents) the primary purpose of the makespace. This is clearly illustrated by the fact that our revenue is derived from purchased memberships to access the tools we provide. That is what our Thursday night tours emphasize as well. Our education programs are largely available whether your a member or not, so membership doesn’t provide significant additional access.

IRC 501©(3) requires an organization to be “operated exclusively” for exempt purposes.

I’m cool with it not being allowed if that’s the rule going forward. Also, I never really thought it was a great fit and didn’t set it up but took lead on it when asked. (I’m also happily a part of their group now after having a great time.)

1 Like

Agree that a specific definition is called for. Without a definition it throws us back into the quagmire of enforcing by opinion.

3 Likes

Could you refrain from saying shit like this on a public forum, Walter? Obviously it is in our best interest to make sure that the organization is run in a way that is compatible with nonprofit status, and I think we’re doing a great job of having an open and accessible center for education.

I think that additionally we provide a place for community enrichment (the improvement kind, not the money kind) that should be tax exempt, but is not for the time being – so we need to especially commit to keeping the space open to the public as an educational resource.

Proposal to define “private event”:
Any event that is not open to the public (for free or an appropriate fee) and is not directly related to the operation of the organization (committee admin meetings, operational meetings, member meetings, board meetings) should be considered a “private event”.

1 Like

Sorry, but when people are making dubious claims based upon questionable interpretations of IRS regs and ignoring the big ones then no. It needs to be said.

The facts are pretty clear.

  • Our revenue is almost solely based upon paid memberships to a shared tool workshop.
  • Our expenditures are largely to support that, though if we shifted from allocations to honorarium based funding of the groups that could largely be offset entirely. IMO, the only groups that should receive allocations are Infrastructure, Logistics, and Classroon. Since those are utility functions.
  • A significant number of our members use our resources to support their business
  • We encourage the use of the space to foster crowd funded businesses.

Spite is not attractive.

1 Like

I disagree. I don’t think our status is a house of cards at all. We sell memberships explicitly to support our purpose - learning how to use tools and make. All of that money collected goes for the purchase and maintenance of tools and the facility, without any exception to which I am aware - and I’ve spent time lately looking at the expense records. This complies with both the spirit and the rules respecting our stated mission.

And while we may have people bootlegging business here, it’s not a one-sided proposition. Most of the people who join here, do so to access and learn how to use the tooling - and we teach this - by class, and by contact with experienced users.

And I’ll point out, that Economic Development is another allowable non-profit purpose, and one which has enabled a great many organizations to build and sponsor incubators - including a fair percentage of Makerspaces in other Cities.

So the situation is hardly unfixable, and really requires only some appropriate policy and rule changes to protect us going forward. That doesn’t translate into “everything changes”.

I think the real problem, is one implied in Eric’s post above:

We can’t survive unless we evolve. Right now, new rules, changes in policy, are often met with a chorus of childish “rules?? we don’t need no stinking rules” derision, from people that have no experience or understanding in the management, legalities, and needs of a larger organization. They still live in a little commune at Ladybird, where that approach was fun and futurish and seemed awesome. But we aren’t at Ladybird anymore. And right now, that legacy is doing more wrong than right for DMS as a whole, imo.

2 Likes

You’re making it difficult to be on your side of this issue.

Gloating is not attractive either.

1 Like

Neither is hectoring and name-calling. If you have a personal issue with Walter, or any other member, take it offline to PM. No sense dragging down a relatively reasonable discussion with your personal observations on someone else’s behavior.

2 Likes

Educational Mission of DMS

The number of formal classes that received Honorariums alone is nearly 1,000 over the past two years. Throw in a lot of classes that are non-honorarium, example Chris Carson’s numismatic sessions, are also educational - the count now is even higher. Plus a lot of our classes are open to the public so it’s not just private benefits, many items in CA and Electronics are usable by non-members (where training is not required).

Plus members teaching each other informally out in the shops and committee areas are educational also. Yes, we have a lot stuff people build and use machines - that doesn’t lesson our educational goal or achievements or threaten our tax status … you are applying and perfecting the skills you’ve learned.

Re: Member dues. IRS is perfectly fine with this model for non-profits - the IRS position is membership dues are not tax deductible for the individual because we do receive a benefit - access to our facilities. We can even make a profit from incidental activities - like when we sell shirts for a profit. Just look at the Form 990 see page 9 we have to file annually, there is a line about profits, it directs you to attach a Form 990-T (think Form 1040 for 501©(3)'s) ) Below is part of page 9 Part VIII Statement of Revenue - note item 1b is membership dues.

The biggest area the IRS attacks 501©(3) organizations is payments to individuals - this where most abuse comes in - we are completely safe: we have no paid employees. We have no reporting requirements for even reporting our BoD Officers names if they make less than $150k, (don’t they wish, they are even banned from receiving Honorariums while in office and a year afterwards) independent contractors only if paid over $100K/yr (note this is separate from W9 issues).

If you need to sleep, try reading IRS Pub i990 for exempt certain organizations such as ours, it’s only 100 pages but will give you a good idea of what they like and don’t like and look for.

See also IRS Pub 557 Tax-Exempt Status for Your Organization, only 75 pages

Oh here’s another good source, the IRS is so helpful - lots of links IRS Website Exempt Organizations: Help From The IRS

I recommend these links because these reflect official IRS positions - I don’t have access to IRS Letter Rulings or better yet Revenue Rulings or court cases, but these are pretty good references to quote from.

6 Likes