Structure Transition Summary Briefing

AAUW Current Topics Briefing #18
Feb. 10, 2009
Revised March 2, 2009
Revised June 15, 2009
Revised Aug. 19, 2009

Introduction
On July 1, 2007, delegates to the AAUW National Convention in Phoenix voted unanimously to approve sweeping changes to AAUW's organizational structure. The vote signaled the Boards of Directors to move forward with strategic initiatives to help create a viable and sustainable 21st-century organization. As a result of the restructuring vote, the Association and the AAUW Educational Foundation are to combine many of their assets and activities to form a streamlined, mission-driven organization with a single set of elected officers. This restructuring culminated in a vote on the bylaws for the restructured entity at the 2009 AAUW National Convention in St. Louis.

In July 2008, a Current Topics Briefing was posted to address the AAUW Branch Tax Status After Restructuring. This briefing compares AAUW's previous organizational structure with the new structure.

Previous Organizational Structure
The American Association of University Women (the Association) was our dominant membership entity, a 501(c)(4) organization, operating through branch and state organizations and non-affiliated members as well. The members elected the Association's board through delegates at the Association's convention. The Association bylaws could be amended only by a vote of the Association's members.The Association, a membership organization, is tax exempt under IRS Section 501(c)(4), making it a "public" or "social welfare" organization.

• Contributions to it were not tax deductible;
• It was permitted to engage in unlimited lobbying; and
• It is subject to restrictions on political activities.

AAUW branches are tax exempt under IRS Section 501(c)(4) and, accordingly, are subject to the same rules. Although the Association was a Section 501(c)(4) organization, most of its activities are also appropriate for a Section 501(c)(3) organization. It is not unusual for charitable activities to be conducted by non-charitable tax-exempt organizations, such as social welfare organizations that qualify under Section 501(c)(4).

The Association's noncharitable activities included a limited amount of lobbying and the periodic publication of a voter guide. The Association was the "central organization," and the branches were the "subordinate organizations" with respect to a group tax exemption for federal income tax purposes. Although the Association and the branches constituted a "group" for exemption purposes, the organizations never chose to file a group tax return.

The AAUW Educational Foundation was the other arm of AAUW, a 501(c)(3) organization with a board of directors as its only members. The board of the Educational Foundation was elected by the Association members at the Association convention. The bylaws of the Educational Foundation could only be amended only by a vote of its members, the board.

The Educational Foundation was tax exempt under IRS Section 501(c)(3), making it a "public charity." The IRS has certain conditions for 501 (c)(3) entities:

• Contributions to it are generally tax deductible as charitable donations;
• A 501 (c)(3) entity may lobby but IRS limits that to certain types and amounts of lobbying; and
• It can engage in absolutely no political campaign activities.

The AAUW Leadership and Training Institute was a 501(c)(3) subsidiary organization that housed AAUW programs such as the National Conference for College Women Student Leaders, the biennial convention, Campus Action Projects, and Campaign College, and it operated under the direction of the Association board.

• Contributions to it were generally tax deductible as charitable donations;
• The ability of LTI to lobby was limited; and
• It was allowed to engage in absolutely no political campaign activities.

Organizational Structure
AAUW's organizational structure is commonly referred to as a "complex structure." The term applies to two or more commonly controlled tax-exempt organizations, particularly when the tax-exempt organizations are of different types. It is common for a Section 501(c)(3) organization and a Section 501(c)(4) organization to operate in tandem. There is nothing at all unusual about the complex structure of the Association and the Educational Foundation as it existed, nor is there anything unusual about the complex structure of AAUW as it exists after the restructuring.

After Restructuring
The restructuring become effective on July 1, 2009, and the "new" organization is known as AAUW. AAUW controls both the Section 501(c)(3) public charity, the primary organization, and the Section 501(c)(4) public or social welfare organization, which may engage in limited activities related to member activism and voter education (and is called the AAUW Action Fund).

Now, donations to the national AAUW Section 501(c)(3) charitable membership organization are tax deductible to the donors on their personal federal tax returns, but donations to the national AAUW Section 501(c)(4) public welfare organization the "AAUW Action Fund" (that supports our Lobby Corps and election-related activities) will not be deductible.

AAUW national dues are $49.00, of which $46.00 is tax deductible by the individual member; $3.00 of that national dues payment is not be tax deductible because it will be used to support the AAUW Action Fund's Section 501(c)(4) activities (Lobby Corps and election-related activities). Likewise, of the $17.00 Student Affiliate dues, $16.00 are tax deductible and $1.00 are not tax deductible for the same reason.

Tax deductible funds (national dues and contributions) may be processed through branch checking accounts. That these funds are collected by the branch is immaterial to their deductibility, as the intent of the payer and the destination of the payment controls the tax deductibility of the payment when the recipient is a 501 (c)(3) organization.

Goals for Restructuring
The restructure was intended to accomplish a number of things for AAUW:

• Make the 501(c)(3) corporation the primary membership organization.
• Transfer most assets (the Section 501(c)(3)-appropriate assets) from the 501(c)(4), the current Association, to the 501(c)(3), the current Educational Foundation.
• Change the 501(c)(3) corporation's name to American Association of University Women, known commonly as AAUW.
• Change the 501(c)(4)'s name to the AAUW Action Fund.
• Make all current members of the Association (the 501(c)(4)) members of both corporations, the restructured 501(c)(4) and the 501(c)(3), and transfer the current organizational structure of branches and states to the restructured 501(c)(3).
• Have all branches and states sign a new affiliation agreement with AAUW, the 501 (c)(3) charitable membership organization and includes affirmation from all AAUW branches and states that wish to be covered by the AAUW group tax exemption of their intention. In addition, each branch and state must include a completed "AAUW State and Branch Information Form" that contains current contact information, to be maintained on file at AAUW, and resubmitted annually to AAUW to be available for public inspection.
• The Leadership and Training Institute will no longer have separate 501(c)(3) status, and the programs currently managed by LTI will be managed as Leadership Programs by the restructured 501(c)(3) organization, AAUW (including the national convention, NCCWSL, Campaign College, the Wage Project, Campus Action Projects, etc.). (This will not affect program functioning, but it will reduce accounting and auditing expense.)
• The diagrams at the end of this document depict the structure of AAUW before and after the restructuring.

Steps for Restructuring

Steps

• Amended 501(c)(3) D.C. and Pennsylvania organizational documents to change the name of the entity and include Section 501(c)(3)-saving language, then filed the amended documents in D.C. and Pennsylvania.
• The Bylaws Committee prepared proposed bylaws for the 501(c)(3) and 501(c)(4) corporations of the restructured AAUW for presentation to the members at the 2009 convention.
• At the Fall 2008 board meeting, the 501(c)(3) Educational Foundation Board and the 501(c)(4) Association Board adopted motions recommending the proposed bylaws to the membership for consideration.
• Proposed amendments to the charter of the 501(c)(4) and bylaws for both the 501(c)(3) and 501(c)(4) corporations were distributed to the membership through the spring issue of AAUW Outlook.
• At the convention, the delegates

  – adopted amendments to the charter of the 501(c)(4)

  – adopted revised 501(c)(4) AAUW Action Fund bylaws

  – adopted a motion approving the revised 501(c)(3) AAUW bylaws for forwarding to the current 501(c)(3) Educational Foundation Board of Directors for official adoption.

• Immediately after the actions above, the 501(c)(3) members (the previous Educational Foundation board) voted to adopt revised bylaws, as of July 1, 2009, effectively ending the Educational Foundation and transferring all its assets and business to the restructured 501 (c )(3) charitable membership organization – AAUW.

Terms of the new AAUW Bylaws

• Under the terms of the new 501(c)(3) bylaws, all members of the former 501(c)(4) (the former Association) automatically became members of the restructured 501(c)(3) on July 1, 2009.
• Under the terms of the new 501(c)(4) bylaws, all members of the restructured 501(c)(4)l became nonvoting members, except that the members of the board of the 501(c)(4) are the only voting members of the restructured 501(c)(4) (the AAUW Action Fund).

Restructure Actions
Framework

• Currently, 501(c)(4) branches and states are exempt under 501(c)(4) pursuant to a group exemption for which the AAUW is the central organization.
• To be eligible for the same group exemption, all the branches and states (subordinate organizations) must be exempt under the same Internal Revenue Code section; for example, all must be exempt under the AAUW 501(c)(3) designation.
• In order for AAUW branches and states to be effectively transferred to the restructured AAUW 501(c)(3),all branches and states must sign a new affiliation agreement that verifies affiliation with the restructured 501(c)(3), and send it with a "AAUW State and Branch Information Form" to AAUW to maintain on file for public examination.
• All branches and states that wish to be covered under the AAUW group tax exemption must indicate that intent when they sign the Affiliation Agreement so that AAUW can include their affirmation with the filing for our group tax exemption with the IRS. Once AAUW receives an IRS determination letter recognizing the group exemption, the individual branches and states included in the filing will be tax exempt. .
• AAUW's lawyers are handling all necessary IRS filings after the restructuring approval process is complete.
• Provision has been made to continue group tax exemption coverage for all entities that were previously covered by the former group tax exemption during the transition to the new group tax exemption.

For a discussion of the impact on branches, see the AAUW Branch Tax Status After Restructuring briefing.

Previous AAUW Organization and Structure Chart

AAUW Organization and Structure Chart after Restructure

This is briefing #18 in our AAUW Current Topics Briefing Series issued by Linda Hallman, CAE, Executive Director.