Charity Versus Tax-Free

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”

Article 5: “charitable purposes” gets mentioned twice.

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

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

“Directors shall conduct themselves ethically”

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”.

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)

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.