LEAF explains how and why funds will be distributed to Main St fire victims
EDITOR’S NOTES: Residents have been asking about the distribution of funds collected for the business owners that experienced the disastrous damage to their shops during the January 2023 fire in downtown Lyons. LEAF issued a statement to their “stakeholders” as to HOW A 501(c)3 NONPROFIT IS ALLOWED TO DISTRIBUTE FUNDS. We asked their permission to publish this for the public to understand, and Lory Barton, Director, gave the “ok”.
You are an important stakeholder at LEAF, and we are writing with an update about LEAF’s efforts with regards to the Main Street Fire.
Here is an overview of progress to date:
Laura Levy’s Facebook Nonprofit fundraiser “to provide some financial support to the business owners who were impacted” by the fire raised $53,068. In the case of this fundraiser, donations were made to Facebook’s nonprofit foundation, not to LEAF, and then ultimately sent to LEAF.
An additional $38,405 was donated directly to LEAF “to support business owners and artists,” for a total of $91,473 received for the Main Street Fire Relief Fund.
Forty-eight hours after the fire, LEAF personally met with and provided $500 in emergency relief to each of the thirty fire-impacted individuals. On January 4, we met again and provided an additional $500 to each of these individuals and arranged to pay some emergency housing needs as well. These distributions total almost $30,000. We were able to get these unrestricted funds into the group’s hands so quickly because it was considered immediate emergency relief.
We have opened up the grant application process for the distribution of the remaining $62,673.
LEAF has, LEAF can, and LEAF will distribute these funds according to the requirements set forth for all organizations, appropriately and expeditiously. This is what we do.
Fire-impacted individuals can complete the simple application form to the to request additional support from the remaining $62,673 in the Main Street Fire fund. We have established a committee of community members who will help set funding guidelines, confidentially assess requests, and make grant recommendations beginning this week.
There are so many complicating variables that the committee must consider in this process. They include the fact there are brick and mortar businesses, owners, artists, differences in size of the entities, alternative income streams, lack of historical data regarding expected income, differing levels of need (means-testing), IRS requirements to verify need, and more. It is very complicated and we want to be careful to provide fair and equitable support. While we are doing what we can, as quickly as we can, these facts remain:
We must follow the same IRS regulations that apply to any and every organization in its distribution of funds.
$62,673 for up to 30 fire-impacted individuals is not enough money to make anyone whole.
These donations were intended to offer limited individual relief. Making our artists and business owners whole is the role of insurance.
See BELOW for Q&A ============
If you have made it this far, you’ve certainly learned that the process of distributing relief – along with all of the other human services work that LEAF offers to our community – is not simple or easy. This is why LEAF is here: We know how to do this work well. It is why we are trusted and respected in Lyons and beyond. We are grateful for your trust and confidence, too.
If you have questions, feel free to contact us at firstname.lastname@example.org. We are proud of of LEAF’s work in our community, and it is always our intention to be honest and transparent in all that we do.
With best regards, Lory Barton, Executive Director
Commonly Asked Questions…Answered
Question: What is “Means Testing?”
Answer: Going forward, by IRS regulation, we must “means-test” all further distributions. This means that recovery funds can be offered to impacted individuals who are in need of help with personal basic needs like housing, utilities, or transportation, while they work to get their businesses re-started.
It’s important to note that these methods would be adopted by any agency or organization providing crisis relief funds. This is the same process LEAF applied to COVID/Gig Grants. It is the same process that has been implemented for Marshall Fire recovery. This process would be mandatory and exactly the same for any organization providing crisis relief. It would not be easier, different, or faster for any other organization. LEAF’s by-laws or internal policies have nothing to do with this, as the process is guided and regulated by the Internal Revenue Service.
Another complexity is that we cannot pay any expenses that may ultimately be indemnified by insurance. We must be careful to not jeopardize the group’s ability to ultimately collect insurance payments. For these reasons, Main Street Fire funds were raised for, and relief issued to, individuals and not businesses.
Question: Why not give the funds to a different organization that could distribute them more quickly, or with more flexibility?
Answer: Every organization that is IRS-qualified to distribute tax-deducted charitable gifts must follow the same rules that LEAF follows. The process would be no different for any other organization. It is not legally possible to give the funds to an organization like our local Chamber of Commerce. Since the donated funds were given to a 501c3 (LEAF) and were tax-deductible to the donor, they cannot be transferred to a non-tax deductible entity like a 501c6 organization (the Chamber of Commerce).
Question: What is the difference between a GoFundMe and a Facebook Charitable fundraiser?
Answer: When people give to a Facebook fundraiser, their donation goes to and is acknowledged by Facebook’s nonprofit foundation as a tax-deductible gift, and is ultimately forwarded to the receiving nonprofit (LEAF). The distribution of the donations by the receiving nonprofit are held to all IRS rules and regulations, including means-testing. Donations can be designated for a specific fund (Main Street Fire Relief), but they cannot be earmarked for a particular individual or purpose. You can read more in LEAF’s article on page 4 of the most recent Redstone Review.
When people give through a crowdfunding platform like GoFundMe, their gift is earmarked for a particular individual and is not tax-deductible. There are no rules or regulations for how the recipient uses the funds. The IRS may issue a 1099-K to the recipient and funds received could affect insurance indemnification.
When a donor chooses to give to a nonprofit, the donor agrees that the gift will be used according to IRS rules. A gift can be directed to a project (Main Street Fire, Food Pantry, etc.), but donors cannot tell the nonprofit where, specifically, to direct the funds.
Question: What if a group member’s needs exceed the capacity of this fund?
Answer: If a group member’s need is larger than the fund’s capacity according to the process established by the grant committee, LEAF will work with the group member within the fund limitations, and refer the member to our partner, the OUR Center, for additional needs or case management.