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December 2022
Brother Knights Several issues have become evident during the past two months, which may be of general interest. The first has to do with how money received by a Council should be reported. All money, no matter the source, whether revenue from fund raisers, donations from any source, income from any source, etc. must be received by the Council’s Financial Secretary and reported as Council income. This requirement is clearly stated in the “Charter, Constitution and Laws of the Knights of Columbus: "Section 122 (a) All moneys obtained from any source, by or through any person or persons, acting for or in the name of any council or under its direction or authority shall be considered council funds and shall be forthwith delivered to the Financial Secretary, who shall give his official receipt therefor and who shall report at the close of each meeting the amounts so received and from what source." Section 139.1 further states that [the Financial Secretary shall] “Collect and receive all moneys due the council, and all funds obtained from any source, by or through any person or persons, acting for or in the name of the council or under its direction or authority, including all moneys resulting from any form of athletic activity carried on by the council or with its authority, or in which its name or any part thereof is used, or in which any representation is made in any way that such activity is a council activity. Provided, however, that where two or more councils engage jointly in any form of athletic activity the moneys resulting therefrom shall be handled as directed by the State or Territorial Deputy or Deputies in whose jurisdictions such councils are located.” District Deputies are responsible for assuring that any money received by a Council is properly reported. Furthermore, it is a District Deputy’s responsibility to verify this by participating with the Council Trustees including the Council’s Grand Knight during all Council audits. This responsibility is not explicitly stated in the “Charter, Constitution and Laws of the Knights of Columbus”; however, Section 62.1 states that “[The District Deputy shall] Have general control and supervision of the councils within their respective districts, and shall be responsible for the enforcement of laws and rules of the Order in and by said council.” Section 62.3 states that “[The District Deputy shall] Inspect the books, vouchers and accounts of councils within the district, and may at any time demand them for examination. Section 62.5 states that “[The District Deputy shall] Be recognized when a District Deputy as a special representative of the State Deputy, and when a Territorial Deputy as the special representative of the Supreme Knight, and the various council officers and members shall implicitly obey his ruling and decisions in all matters of disputes or otherwise, and all lawful orders made by him.” Section 62.7 states that “[The District Deputy shall] Cause the accounts of councils in his district to be kept in the books furnished by the Supreme Secretary, and in the manner provided by law.” A second issue relates to members who have individually formed Washington State nonprofit corporations, some of which have obtained federal IRC 501 (C) 3 tax exempt status. First, Councils need to understand that they are a 501 (C) (8) tax-exempt fraternal benefit society under the umbrella of the Supreme Council of the Knights of Columbus Fraternal Benefit Society. Councils cannot be both a 501 (C) (3) and a 501 (C) (8) organization as a Knights of Columbus Council. The following is general guidance from the Office of the Supreme Advocate for councils wanting to form a 501(c)(3) tax-exempt charitable corporation. Section 162.11 of the Laws of the Order prohibits councils and members from forming “any business, or social, or other enterprise” using “Knights of Columbus” or their membership without permission of the Board of Directors. The law prevents councils and members from using the Order to establish independent, third-party entities outside of the fraternal of the Knights of Columbus. This includes the formation of a 501(c)(3) tax-exempt charitable corporation. Council [Number] is subject to Section 162.11 by the charter conferred on the council by the Board. The reason for this law is simple: to protect the Knights of Columbus, councils, and individual members from incurring unwarranted risks and liabilities. Councils should work within the existing fraternal structure of the Knights of Columbus to raise and donate funds to charitable causes, which has proven to be very successful over the course of many years. Knights of Columbus Charitable Fund (KCCF) offers a solution for councils that seek to establish separate corporations to raise and distribute charitable funds. Through this solution, a local council may set up a Donor Advised Fund (DAF) through the KCCF. A DAF is a fund held by a nonprofit corporation that is recognized by the IRS as a charitable entity under Section 501(c)(3) of the Internal Revenue Code. KCCF is a charitable corporation that offers DAFs in order to facilitate Catholic-compliant philanthropy for dioceses, councils, individuals, and other institutions. A Knights of Columbus council may set up an account with KCCF through a simple application process and with a minimum contribution of $5,000. A DAF provides a valuable service to councils that have a significant amount of money in a bank account, or hold other liquid assets (e.g., a council that has received money from the proceeds of the sale of a home corporation facility, or a large bequest from a generous donor). Setting up a DAF through KCCF ensures that Council [Number] is compliant with Section 162.11, as the DAF is fully subject to checks and balances of the Laws of the Order. Councils should obtain legal advice from a lawyer licensed to practice law in Washington State and consider all of the risks, legal obligations, implications, insurance requirements and liabilities that may exist, among other factors, when the Council considers forming a separate 501 (C) (3) organization. The Knights of Columbus Washington State Council Advocate is not a lawyer. There don’t appear to be any advantages for Councils that have formed their own 501 (C) (3) organizations. Furthermore, there are a number of disadvantages when a Council forms a separate 501 (C) (3) organization, which include record keeping and reporting requirements among others. In addition, dissolution of a 501 (C) (3) organization can be a time consuming and expensive process, particularly when the Council mingles Council funds with charitable donations, as some of our Washington State Councils are now finding The Washington State Council’s Columbus Charities 501 (C) (3) and Pennies for Heaven 501 (C) (3) provide avenues for directing tax deductible contributions to various causes that conform with the principles of the Catholic Church. Furthermore, the Supreme Council of the Knights of Columbus provides numerous opportunities for tax deductible contributions for which a Council can receive credit. Councils are encouraged to review two letters from Internal Revenue Service received by the Supreme Council of the Knights of Columbus. The first, received 25 October 1940, established the Knights of Columbus as well as all subordinate Councils status as part of a tax-exempt fraternal benefit society. The second letter, received 22 May 2017, provides the following guidance. “For federal income tax purposes, donors can deduct contributions or gifts they make to [Knights of Columbus Councils] if the contributions or gifts are used exclusively for IRC Section 501 (C) (3) purposes. If [the Council solicits] contributions or gifts for non-501 (C) (3) purpose, the solicitation must include a statement that the contributions are not deductible for federal income tax purposes.” Both of these letters are available in the Knights of Columbus Officer’s Desk Reference in the Section for “Tax Compliance for all Councils in the United States.” This Section is under the heading Tax Issues in the Officer’s Desk Reference.
Vivat Jesus!
Dr Scott Hulse
State Advocate
Washington State Council
StateAdvocate@KofC-wa.org
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