[Chapter-delegates] Bank Accounts was - deadline for admin funding

[Andrew Sullivan]

Hi,

On Mon, Jul 13, 2020 at 11:31:29AM +0800, Winthrop Yu via Chapter-delegates wrote:

>>"/Regardless, I believe that it _would_ be possible, under the 
>>current chapter engagement letter arrangements, for a chapter to 
>>find a home inside an NGO who can provide the requisite financial 
>>shelter/."
>Thank you for this, it is at least an avenue that we can explore, as 
>contrasted against previous responses which insisted on a bank account 
>in the chapter's name.

The way this normally works in other organizations where I've seen it is that the bank account does end up "in the chapter's name."  That is, an unincorporated chapter finds a legal, incorporated, non-profit home that acts as an umbrella for the chapter, opens a bank account in its name, and so on.  This is actually not unlike the way some SIGs have become affiliated with chapters, and it's also the way the IETF worked approximately from the founding of ISOC until 2018.  It's also the way various free software projects I used to work on sometimes funded themselves.  It sometimes has certain negative consequences for the unincorporated party, because it usually means accommodating oneself to the needs of the other organization, but it is often better than the alternatives.  It appears to me that the best way for it to happen is for the chapters who have the need to do the local research necessary, because they are the people who are closest to the local situation.

>
>>"/I am quite confident that the "two or more chapter officers" 
>>approach is not acceptable given the constraints under which we 
>>work./"
>This is regrettable as i do recall this option being mentioned (again, 
>i do invite comment, challenge or correction of my recollection.)

I'm totally prepared to believe people thought this would work in the absence of legal advice.  Also, US tax law has always been complicated; but as the political (and USG income) situation has become more, uh, challenging in the past few years the pressure on the IRS to tighten regulations to eliminate corner cases has increased.  So the rules keep getting stricter.  There's not much we can do about that: the Internet Society was incorporated in the US a long time ago, and everything (including, please note, essentially all of the income) is predicated on that.  So, I'm sorry that this is an impression you formed based on staff remarks, but it's not something that is possible today.

>As "difficult" as that point is, this is the reason i asked -- /if 
>there is a strict prohibition against ISOC HQ funding chapters that 
>are not legally-registered, or whether this is something else such as 
>a risk mitigation measure/?

Legal registration is not a hard requirement.  Some countries, however, require it for bank accounts.

>Yes. I was referring to Christine's reply to a specific question i 
>posed regarding those chapters who were already able to procure a bank 
>account in the chapter's name but do not have legally incorporated 
>status, thus ...
>>"/In most cases, a local legal registration is needed for the bank 
>>to be able to open a bank account in the name of the Chapter. 

I don't want to put words in her mouth, but I think what she was saying was that, in most of the cases where there is such a problem, it's a local-law problem: chapters can't get a bank account under local regulations because they need to be a registered entity to have such an account, and it is too difficult (or even impossible) to do that.  There are definitely many jurisdictions where unincorporated associations and so on can have bank accounts, and the chapter charter letter does not require legal incorporation.  (There's more than just bank accounts at stake there.  In some places it's effectively impossible to register as an association this way.)

>The question then being -- would even these chapters now be required 
>to legally incorporate?

No.

>requirement -- /if we were to relegate the matter to a (assume ChAC) 
>working group, would any such discussions or subsequent 
>recommendations from ChAC actually be able to change the decisions 
>made by ISOC HQ, particularly the hard requirement for legal 
>incorporation/?

As I said, there is no such hard requirement, though there might be one for a given chapter because of laws in their country.  The bank account rule is not something that we can change: it's due to US laws, regulations, and IRS interpretations.  I really am sympathetic with the difficulty this creates, but it isn't something we can fix and it is something that other US charities are struggling with, too.

Best regards,

A

-- 
Andrew Sullivan
President & CEO, Internet Society
sullivan at isoc.org
+1 416 731 1261