Starting a non-profit requires more than good intentions

You won’t get to meet Kevin M. Fikes. He passed away in January from a stroke at age 36. But his mother, Dora Fikes, would have wanted you to know him and his story. How, despite becoming a paraplegic nearly 20 years ago after a car accident, he learned to drive a vehicle equipped with hand controls. How he studied Web site design at Pikes Peak Community College and became a counselor to others with disabilities.

She knows her son’s courage, perseverance and determination can inspire others who have physical disabilities to do their best, try their hardest and enjoy life to the fullest.

So Fikes wants to start a nonprofit organization in his name.

“It was his wish to help people with disabilities with assisted living services, transportation and health care needs to give them hope and help them move forward,” said Fikes, who works as a home health provider. “I want to give back what I lost, and I have the education and the experience to make it work.”

But, as she’s learning,  it takes more than a big heart, good intentions and a worthy cause to form a nonprofit.

The hoops to jump through are plentiful and big, said Marilyn Canitz, who worked for two years to get the official 501 (c)(3) nonprofit designation for Quilts from the Heart, a group she started in 2004 to handcraft quilts for children in crisis.  She started the process in January 2007, and got word in January of this year that she had succeeded.

“It was very hard. The IRS application is long, and you have to use government language. But I kept impeccable records, which helped,” Canitz said.

Starting a nonprofit is both similar and unlike starting a business, said Amy Rodda, reference librarian for the El Pomar Nonprofit Resource Center at the downtown branch of Penrose Public Library. Rodda gives free tours of the center, which has a wealth of online and print information for anyone wanting to form a nonprofit, search for grant opportunities and read up on how to best operate one.

A business plan is a must, Rodda said.

“You have to have a clear mission statement telling what you plan to do and make sure other groups aren’t doing the exact same thing, which is different than a for-profit business, which can have competition,” she said.

A board of directors also is required, along with a team of supporters who will pitch in money for start-up costs, such as hiring an attorney and an accountant and buying supplies.

“It’s not a one-owner type of setup, like a company. You need a group of people to get behind you,” Rodda said, “and you have to have backing before you get tax-exempt approval. Many people rely on donations from family and friends or their own savings accounts.”

In addition to applying for tax-exempt status with the Internal Revenue Service, nonprofits need to register with the Secretary of State’s office.

“It’s harder than many people expect,” Rodda said. “It’s very detailed paperwork, and just the IRS process itself can take six months to a year or more. But if you want to solicit donations, you have to get that approval.”

The main advantage of tax-exempt status is that it allows the organization to do fundraising and accept charitable donations that donors can write off on their taxes, said Karen Connelly, spokeswoman for the IRS in Colorado.

The national average for getting tax-exempt designation is 114 days, she said. However, 40 percent of applications take “significantly longer,” Connelly said, because the IRS needs additional information from the applicant to be in compliance with federal tax laws.

But organizations may operate as tax-exempt on a good-faith basis while waiting on a determination letter, she said.

The most common application form for charitable organizations is the 29-page 1023. Filing fees are $750 for organizations that intend to have gross receipts of more than $10,000 annually and $300 for those grossing under $10,000.

Nationally, the IRS received about 76,000 applications for tax-exempt status in fiscal year 2009, which ended Sept. 30, Connelly said; less than 1 percent were denied. But about 10 percent, or nearly 8,000 applications, were rejected for failing to establish IRS requirements and another 1,400 applications were withdrawn by organizations after the IRS began inquiring about their proposed operations, she said.

Before and after acceptance, organizations have to comply with federal laws governing tax-exempt status, including not engaging in political campaigns, not operating in private interests and working for charitable purposes, Connelly added.

Canitz sought tax exemption for her quilting group after it received an unsolicited donation of $1,600 from a local hospital.

“We needed to get a bank account and do it right, so that’s what we did,” she said. “The group means a lot to me, and I wanted to keep it going, recruit new members, get the word out and not have to have garage sales to raise money to buy supplies. Now that people know we’re on the up and up, it should precipitate more money coming our way, so we can make more than the 600 quilts we now donate in the community each year.”

Fikes, also, is finding that the system is complex and hard to navigate, but she’s pursuing her son’s dream and is gathering support from friends to start the process.

“Just like I wouldn’t stop until my son got what he needed, I won’t stop until this gets done,” she said.

STARTING A NONPROFIT?

Here are some places to go for assistance:

• To schedule a free tour of the El Pomar Nonprofit Resource Center at Penrose Public Library, 20 N. Cascade Ave., call 531-6333, ext. 2335. The library district also offers a variety of free classes, some of which are nonprofit related. Go to www.library.ppld.org for a list.

• The Center for Nonprofit Excellence promotes the effectiveness of the nonprofit sector through leadership and resource development, advocacy and collaboration. It hosts numerous workshops and events. Go to www.cnecoloradosprings.org.