by Pete Mazzaccaro
Soon, the Chestnut Hill Community Association’s membership will have a choice to make: Support the proposal to transform the association into a 501(c)(3), tax exempt, charitable organization or turn that proposal down and keep things as they are.
Presently, the CHCA is a Delaware nonprofit corporation. It cannot accept tax-deductible donations from the public. It does not qualify for numerous grants available to 501(c)(3) organizations. The proposal before the CHCA board would move the CHCA into a new Pennsylvania 501(c)(3) corporation, leaving the Chestnut Hill Local behind to occupy the old Delaware corporation.
For several years now, the momentum at the board level has been very much in favor of going forward with the move. The benefits – better fundraising opportunities – are attractive. The downside was not apparent.
Last week, however, concerns over just how much control the CHCA will have over the operations of the Local gave many on the board pause. Just what would a separation mean? What would the CHCA be giving up in exchange for newfound legal fundraising abilities?
The answer to those questions is not obvious.
Currently, the CHCA and the Local are not separate organizations. They are two divisions of the same corporation with ultimate oversight of both falling to the CHCA’s board of directors.
Under the new organization, the Local will get its own board of directors. Those directors will be appointed by and serve at the pleasure of the board of directors of the CHCA.
Yet, when board members last Thursday asked their attorney John Falco, who has logged more than 100 hours of pro bono work on putting the plan together, if they could simply compel the Local to send funds its way, the answer was not a simple yes or no.
Some of the complication comes down to the nature of both corporations. The Delaware nonprofit corporation, which is what the Local is and will be, is not the sort that is designed to send dividends off to other organizations. Instead, the profits it makes are supposed to be reinvested in itself.
There’s also the matter of enhanced legal complications of a 501(c)(3) organization, which must limit just how closely it controls a for-profit entity like the Local. That is why the Local needs its own board.
That board could conceivably say no to the CHCA. It doesn’t seem likely, but it is possible.
So, faced with that uncertainty, the board balked and decided to wait for a meeting down the road to take the matter up again.
I don’t necessarily see a problem with the CHCA collecting a dividend from the Local. If the Local is making money and can adequately invest in technology and staff, it makes sense to pass along surplus funds to the CHCA.
But scuttling the plan to split the CHCA and the Local over this issue would be a significant loss of opportunity, and I’m not talking about fundraising opportunities.
Perhaps one of the biggest obstacles both organizations have faced is getting distracted by the business of the other. The CHCA has gotten tied up several times in the last several years in the business of the Local. Sometimes that involvement has been absolutely necessary. Other times, it’s been at best a distraction.
Both the CHCA and the Local could arguably best be served by boards focused specifically on the business of each. The CHCA board can focus on growing the association’s membership and its funding. A Local board can focus on enhancing the paper’s digital footprint and addressing circulation.
Point is, a separation of purpose might be the best thing for both organizations. Let’s let it happen.