Charity Versus Tax-Free

image: Bearman/Flickr (Creative Commons)

image: Bearman/Flickr (Creative Commons)

In the comments to our BMOrg Hath Spoken article, Burner Cooter raised an interesting point.

This is a slight tangent but the deal with the non profit status is really starting to irritate me as it seems to get inserted every time the ethics of the Borg comes into question. Being a nonprofit organization in no way makes any implications on the honesty or ethics of the company. All it means is the profits get reinvested in the company since there are no share holders. 99% of the time this mean profits get spent on the salaries and benefits of top executives. Some of the most unapologetically corrupt companies in the world are non profits. Think FIFA or the NFL. But every time the topic of ethics comes up it is subtly pointed out that the Borg is a non profit. It doesn’t mean anything.

Sorry to irritate you, Cooter. While your general point is technically correct, and “non-profit” can simply mean “tax dodge” rather than “charity”, for the specifics of the Burning Man Project we need to look at 2 things:

1. The ByLaws of the Burning Man Project

2. The Statements of the Founders about the transition to a non-profit.

The NFL, chaired by Roger Goodell (Marian’s cousin?) is an unincorporated 501(c)6 tax-exempt trade association, based in Washington, D.C. Its tax-free status is quite controversial. FIFA is incorporated in Switzerland. The Burning Man Project is a 501(c)3 California Public Benefit corporation. According to the IRS:

Organizations described in section 501(c)(3) are commonly referred to as charitable organizations… 

The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual.

1. From the ByLaws of the Burning Man Project

Article 1: “The principled means that serve our mission shall always be inherent in our goals and projects”

bylaws article 1

 

 

Article 5: “charitable purposes” gets mentioned twice.

bylaws article 5

 

6:00 & Ring Road “The Directors may not engage in or approve any activity that is inconsistent with the Ten Principles”

bylaws article 6

 

6:00 to 9:00 & Ring Road: Duty of the Directors

“Directors shall conduct themselves ethically”

 

bylaws article 6 09

8:30 & Decommodification : Philosophy Committee

“must operate in order to remain true to the Ten Principles…shall become binding on the operations of Burning Man Project”.

bylaws 830d 03

 

Their latest blog post tries to claim that the “Burning Man event” is different from the “Burning Man Project”, but if the “Burning Man Project” did wholly acquire “Black Rock City LLC” as they claimed at the start of 2014, this cannot be true and the event must be part of “the operations of Burning Man Project”.

Black Rock City, LLC, which operates the annual event in Nevada called “Burning Man”, became a fully owned subsidiary of the Burning Man Project as of January 1, 2014:

On December 27, 2013, the Burning Man Project Board of Directors voted to make Black Rock City LLC a subsidiary and is now the sole shareholder of the LLC, which will continue to manage the event in the desert. The transition became official January 1, 2014.

Of course, they may have pulled “the old bait and switch”, and told us that they had sold “the” LLC to BMP, but actually sold Black Rock City, LLC to someone else. There are a lot of LLCs floating around within this this corporate conglomerate, as well as many registered non-profits. But I’m more inclined to take their statement at face value, which means the Burning Man event is a solely owned subsidiary of the Burning Man Project.

image: Dru/Flickr (Creative Commons)

image: Dru/Flickr (Creative Commons)

Other interesting clauses in the Bylaws refer to “non-voting observers” (Article 3, 6:30 & Inclusion), the right of the Founders to license the trademarks back to the group (Article 5, 1:00 & Center Camp), “a proposed transaction” (Article 5, 4:00 and Center camp), all kinds of allowable Real Estate transactions (Article 4, 10:00 & Center Camp) , Directors making money from the business via consulting, sale of goods and rent “at or below fair market value” (Article 5, 6:00 & Center Camp).

Despite Larry Harvey’s claims that the “10 Principles are just an ethos, not the 10 Commandments”, a Director can be removed “for cause” for failing to cure a breach of any one of the 10 Principles (article 6, page 12).

You read the Bylaws here.

2. Statements of the Founders

We’ve been trying to give them the benefit of the doubt that this is more than just a tax dodge, because that’s how they sold it to us since the idea was introduced in 2011, and that’s how it was promoted in the movie produced by former Burning Man Director Chris Weitz, “Spark: A Burning Man Story”.

 

The Burning Man Project’s Mission and Vision certainly sound very altruistic:

Mission

The mission of the Burning Man Project is to facilitate and extend the culture that has issued from the Burning Man event into a larger world. This culture forms an integrated pattern of values, experience, and behavior: a coherent and widely applicable way of life. The survival and elaboration of this culture depend upon a cultivated capacity for learning and transmitting knowledge to succeeding generations.

Vision

The Burning Man Project will bring experiences to people in grand, awe-inspiring and joyful ways that lift the human spirit, address social problems and inspire a sense of culture, community and cultural engagement.

When they announced that their transition had been “fully completed”, they said:

The Burning Man Project is a public benefit organization, and our intention is to build the network of connectivity through relationships with individuals, organizations and government entities. We have great ambitions for what we sometimes refer to at HQ as a “100 year plan.” We’re a little over a quarter century into that plan… and our best days are still ahead.

We are restructuring some of our operations to strengthen our capacity to deliver on our ever-growing potential as a force for creativity and good in the world

Marian Goodell, Huffington Post March 4 2014:

“In our more exciting moments, any one of us who has been to Burning Man thinks it can change the world,” she added. “It brings people hope, and it makes people less afraid of others. It transcends religion and politics. It’s worth it to expose others to what we’ve learned from this cultural experience.”

Larry Harvey, New York Times August 28, 2011:

“We’re going to treat Burning Man like what it always should have been: not as a commodity, but as a gift

Larry Harvey, Burning Blog:

Our mission has always been to serve the community, and a non-profit public benefit corporation is the most socially responsible option to ensure and protect the future of Burning Man

Scribe in SFBG, discussing “Spark: A Burning Man story”

More cynical burner veterans may have a few eye-rolling moments with this film and the portrayals of its selfless leadership. While the discussions of the ticket fiasco raised challenging issues within the LLC, its critics came off as angry and unreasonable, as if the new ticket lottery had nothing to do with the temporary, artificial ticket scarcity (which was alleviated by summer’s end and didn’t occur this year under a new and improved distribution system).

And when the film ends by claiming “the organization is transitioning into a nonprofit to ‘gift’ the event back to the community,” it seems to drift from overly sympathetic into downright deceptive, leaving viewers with the impression that the six board members are selflessly relinquishing the tight control they exercise over the event and the culture it has spawned.

Yet our interview with the LLC leadership shows that just isn’t true. If anything, the public portrayals that founder Larry Harvey made two years ago about how this transition would go have been quietly modified to leave these six people in control of Burning Man for the foreseeable future.

Larry Harvey, the New Yorker:

Burning Man is guided by what initiates call the Ten Principles: Radical Inclusion, Gifting, Decommodification, Radical Self-Reliance, Radical Self-Expression, Communal Effort, Civic Responsibility, Leaving No Trace, Participation, and Immediacy. These ideas, Harvey suggested, might one day form the basis of a new world order

Here’s the official launch of the Burning Man Project on August 5, 2011. I was in the crowd that day, before I started this blog. I believed them to be genuine in what they said: “we want to help change lives”. Larry starts at about 10:00.

 

19 comments on “Charity Versus Tax-Free

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  4. The folowing quotations are from Article 1 of BMP’s Bylaws.

    “The mission of the Burning Man Project is to facilitate and extend the culture that has issued from the Burning Man event into the larger word” by “upholding”ing and “manifest”ing “the values described in the Ten Principles of Burning Man”.

    ” ‘Burning Man’ shall be understood as referring to a way of life lived consistently with these Ten Principles.”

    ” ‘Community’ as referred to in these principles applies to any human community.”

    Burners can’t refer to “Burning Man” to raise money to support public playa projects. And, according to Danger Ranger: “The sole purpose of Decommodification LLC is to protect the Burning Man name”. Even official Regional Contacts must sign 1-sided contracts regarding their use of the phrase “Burning Man”. The Burning Man Project’s IRS tax exempt status hinges upon facilitating and extending “the culture” (seemingly Borg NPD culture, not “Burner culture”) into the larger world. Yet, farther down the prargraph, they legally define “Burning Man” as “referring to a way of life lived consistently with these Ten Principles.”

    So, how does Decomoddification, LLC and the Borg’s army of lawyers propose to “protect the Burning Man name”, when the Bylaws of the BMP loosely defines the “Burning Man” culture they promised the IRS they would “facilitate and extend” as “a way of life lived consistently with these Ten Principles.”?

    In other words, “a way of life lived consistently with these Ten Principles” should not only be a Bylaws requirement for BMP’s BoD; it’s supposedly the very basis of the Borg’s IRS tax exemption! Since Admiralty Law has come ashore, I have desire to join the BAR cabal. But, my lay research indicates that an organization’s IRS tax exemptions are based on their own mission. Also, my understanding is that ONLY those aspects of their business directly tied to that mission can be exempt! So, a tax exempt organization cannot, unless it spends more on accountants and lawyers than on forwarding its own mission, like the BMP does, said organization must pay taxes on those things that are not directly tied to carrying out their mission. Besides seeing the BMP’s Bylaws, it would be useful to see their Articles of Incorporation for a Charitable Nonprofit Corporation. This would tell us more about what the BMP’s tax exemption is based upon, and what activities can be justified as tax exempt, and which ones cannot. Also, I’d love to read their Strategic Plan.

    501(c)(3) status can be given to a Charitable, Educational, or Scientific organization. The applicant must also prove why it should be considered a Public

    Charity, or be considered a Private Foundation by default. Private Foundations primarily make grants to other charitable organization. I won’t go much into

    Private Foundations and Private Operating Foundation here. But, the definition of a Public charity has a lot to do with their structure and revenue sources. Revenue sources has a lot to do with many of these definitions. In order to qualify for and keep 501(c)(3) Public charity status, it must be organized exclusively for 501(c)(3) purposes, and must reflect this in the language of its Article of Incorporation. Tax Codes are laws that restrict Privte Foundations from “Self-Dealing”, and Public Charities from “inurement” of benefits to private individuals.

    That last paragraph was from my notes from a few years ago. In summary, the Bylaws are more operational- it’s the specific language found in the Articles of Incorporation that dictate tax exept eligibility. Also, remember that tax exempt organizations can be pro-business, such as 501(c)(6) orgainzations, including Business Leagues, Chambers of Commerce, and Real Estate Boards! The Borg is certainly acting more like a Business League than a Charitable, Educational, or Scientific organization required for 501(c)(3) elibility. If they really want to push social issues such as the Tin Principles, they should’ve looked into 501(c)(4); dealing with Civic Leagues (i.e. the Prinicple of “Civic Responsibility”) , Social Welfare orgs (ha), and Local Associations of Employees (double ha).

    So, I guess my point is that the BMP must not only hold their BoD to their Bylaws, and standard corporate laws against Board members “self-dealing”. The BMP could lose their tax exempt status, if they are not paying taxes on things that do not either “uphold” or “manifest” “the values described in the Ten Principles of Burning Man”. Additionally, apart from the moral implications, there are potentially very real consequences for committing outright Fraud.

    Therefore, in light of my lay interpretation of the facts presented above, I submit to you that the Borg’s whole “Ten Principles are guidelines, not laws” is more than a semantic deception. Could it be, that the Burning Man Project’s Articles of Incorporation and Bylaws, in conjunction with tax codes and laws against conflicts of interest, have actually MADE the Tin Principles into ACTUAL laws that the BMP has created for itself to must legally follow, lest it lose its tax exemption and possibly be sued for Tax Evasion and/or Fraud?

    Remember how Al Capone was finally taken down; taxes.

    Also, by the terms defined by BMP’s own Bylaws Article 1, “any human community” living “consistently with these Ten Principles” should be able to call itself a “Burning Man Community”. That is, unless Decommodification, LLC sues people by claiming, “oh, those aren’t OUR Bylaws; those are the BMP’s Bylaws.”

    One can almost understand why it takes literally months to unravel the complex legal, accounting, and semantic web of lies The Borg has spun around itself. It literally doesn’t know its ass from its elbow, due to the same deceptions via multiple corporations and DBAs that it sells its own IP to itself, and other loopholes.

    It reminds me of Lost Motel renting canvas condos to Caravansicle, or Danger Ranger’s equation of JT “taking a loss” with him not having intended to profit off of his commodification of Burning Man. It’s a lot like Hollywood claiming a loss due to it charging itself for its own licenses, just so it can legally cheat the people who are relying on a movie’s “profits” in order to get compensated for their work. The movie intentionally doesn’t “profit”; it just pays itself in other ways, so they can intentionally fuck over the people they promised a cut of the “profits” to.

    The funny thing about greed is that unless The Borg constantly pays their protections, there are few entities greedier than Uncle Sam. After a while, paying a cut to the BLM and LEOs just ain’t gonna keep a multimillion dollar venture, covered by the biggest business rags in the world, under the radar. Eventually, there will be no more in the shade, and the multi-ton gorilla’s gonna get a raging sunburn.

    The NPD shitshow is that Borg members’ communications reveal more deceptive and antisocial thinking and behaviors literally every time they type or talk. Just like Corporate Geopolitics, the bullshit has piled so high, it’s forever seeking to bursting through the seams. Perhaps even more so than self-denial or relying on poor collective memory, this constant weaving and piling up of internal bullshit, crimes, and coverups, is the main reason the Borg have remained doggedly tightlipped for so long. Two of my favorite analogies of the situation go something like: “The portapotty is full, and even cracking open the bulging door for the shitsucker tube to come in, is always prone to some kind of fetid discharge.” And, “The skeletons are piling up inside the closet, and even trying to catalog them, let alone organize them, is guaranteed to unleash an ossuary torrent.” I say, let the bones roll where they may!

    Liked by 1 person

    • Reb, outstanding comment. A combination of brilliant insights and laugh-out-loud moments. You’ve made my day!

      And now they want to scale this to something worldwide, working in multiple jurisdictions – all based on an army of volunteers and starving artists handing over their IP.

      AFAIK their last big lawsuit – with John Law – settled out of court. I wonder if they’ve ever even BEEN through a discovery process before. The ossuary torrent, love it.

      Like

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  6. Is there any legal remedy for the obvious betrayal of the articles of incorporation’s commitment to the 10 Principles? Can the state sue to get some transparency at minimum and ideally an entirely new management team?

    Liked by 1 person

  7. I just read the Danger Ranger Facebook post. Doxing someone even gets you banned at 4chan. I’m sure it’s a violation of Facebook’s TOS. If I had a Facebook account, I’d report it myself.

    Burnersxxx, I’m looking forward to your blog post here on the subject. There are very few examples in the world that warrant doxing – Cat Bin Woman being prime. One does not use the tools of the Internet Hate Machine against someone for simply being an irritant. The backlash can be VERY bad.

    Liked by 1 person

    • Thanks Junebug. I have tried contacting him directly, as well as commenting on the post. If he doesn’t do the right thing soon then I will have no choice but to escalate the matter.

      Like

  8. My thoughts? I am fucking depressed. This whole thing is a facet of what is taking place in the USA and world wide.The .00×1% are becoming economic kings and forming dynasties based on wealth. Egalitarianism, civil society based on laws and principles, non-corruption, any sort of economic or legal justice or class mobility are destroyed. Totalitarian control by a tiny elite which controls all wealth and power awaits at the extreme ends of the Left or the Right side of the political spectrum. The results are identical. It looks as if human social organization is headed towards utter tyranny and we are taking the political Rightward direction to get there.
    A Supreme court justice in the FDR era said (paraphrasing) We can choose to allow a few men to have extreme wealth, or a democracy. Having both is impossible.

    Liked by 1 person

  9. The part about BMP not having influence over the Burning Man event in Larry’s post threw me for a loop, for the reasons you state. It’s common for BODs to not have a say on day-to-day operations, but almost impossible to avoid them being involved with strategic decisions, especially when 6 of them also still have jobs with the event. But whatevs.

    Liked by 1 person

  10. Kudos, burnersxxx, on an awesome post, and thank you for providing the independent press upon Burning Man, and upon the actions of the BMOrg. Larry, and his mates, on the Project board must follow the Ten Principles, no matter the manner of inconvenience of which he might view some of the principles, most especially, in regards of Commodification Camps.

    As you stated, and, as an explanation towards others, the Project board of directors labour as volunteers, for which, they do not receive payments. But, at least, 4 of them are paid reasonable salaries in due of their positions upon the Burning Man Project. Marian is paid as the Chief Executive Officer, Larry is paid as the President of the Project, Harley is paid as the Transition Manager, and as the Black Rock City Manager, and Will Peterson is paid upon his labours as the Director of Nevada Relations and Special Projects. It is not known might Crimson be paid upon her labours for Burning Man Arts.

    But, salaries are solely a small bit of cash within their estimated $35 to $47 million cash out of 2010 – 2017*. Their cash out, within 2014 to 2017, is payment for their Burning Man(TM) trademarks in early 2017, licence of their Burning Man(TM) trademarks each year, licence payments, from others, for images of Burning Man, and salaries in due of their positions upon the Burning Man Project. I estimated $85 to $130 of each ticket sold, of 2014, of 2015, and of 2016 is directed towards their pockets.

    They stated numerous times within Spark, they gifted, or, utilizing other terms, donated, Burning Man, i.e., Black Rock City LLC, to the community, i.e., to the 501(c)3 Project. Thus, they received numerous millions of tax deductions in return, perchance, $30 million, or $45 million. It is not a tax dodge, it is the manner in which 501(c)3 corporations are of the intention to operate, it is the rationale of why the Burning Man Project is a 501(c)3, they would not have gifted the BRC LLC to a for profit corporation, they desired the tax deductions upon their other income gained within their cash out, making their cash out near to free of tax levies.

    *In the brace of months since this estimate was posted, no person has proved any statement, or any number to be incorrect, nor upon the first version of this estimate, posted within May, except some numbers were too small. This estimate is based upon their statements, their numbers, and their corporate records, click on the links, within the post, for the supporting statements, numbers, and corporate records. Might any person prove any statement, or any number, to be incorrect, please do so in the comments upon that post.

    Liked by 1 person

  11. Wow a shout out. Thanks man. To clarify my point a little. Forming a non profit charity is no guarantee of the behavior of that corporation regardless of bylaws, etc. Many non-profits do tremendous good, yet some are used for money laundering, tax evasion and/or profiteering. Many are poorly run and mismanaged. Not all non-profits are created equal. Any organization is only going to be as good as the individuals running it and the ethics of an organization are only going to be as high as the ethics of the people in charge. Or to put it another way, just as the clothes i wear have no bearing on my morality, a companies tax status and bylaws have no bearing on the actual ethics of that company in practice. While i make no accusations, the implicit argument that the Borg is a non-profit ergo must be operating in an ethical and/or responsible manner is fallacious and a bit of a red herring.

    Liked by 1 person

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