In April 2017 I wrote a blog post called "New Salem Main Street Association debuts with questions and concerns." Nine months later, those questions and concerns remain.
First, it's peculiar that this group remains so secretive, since the kickoff event had some lofty goals:
(1) Advocates for downtown Salem businesses, property owners and residents
(2) Implements marketing and promotion of downtown Salem
(3) Manages funds related to the economic vitality of downtown Salem
Yet the Salem Main Street Association still doesn't have a web site, aside from the one above. The small print says, "We're under construction. Please check back for an update soon." That's what it said nine months ago, as I recall.
Yet the City Council bestowed $32,000 in Parking District funds to the group last October, as I wrote about in "Here's why Salem needs a genuine downtown association." What bothered me then, as now, is that the Salem Main Street Association actually isn't an association, since it has no members.
A new group, Salem Main Street Association, was formed in April, as I discussed in "New Salem Main Street Association debuts with questions and concerns." Among other things, I noted that the Association doesn't really deserve its name, since it doesn't have any members.
Rather, it is a 501(c)(3) charitable organization with a self-selected board of directors. Meaning, the board established by the founders chooses new board members. Since there aren't any members -- such as downtown business owners -- Salem Main Street Association isn't at all like a real downtown association.
...None the less, they asked for $32,000 from Parking District funds. And last night the City Council passed an ordinance that allows the City Manager to give grants that "further economic promotion activity."
Download Resolution Economic Promotion
Interestingly, the resolution doesn't mention the Salem Main Street Association. I have to assume that a separate budget document authorizes the $32,000 to go to that group, rather than being available to other organizations that might want to engage in downtown economic promotions.
The Salem Main Street Association shouldn't be a 501(c)3 organization. Rather, it should be a 501(c)6 organization. I've concluded this after looking at IRS descriptions of the two sorts of non-profit organizations.
A (c)3 organization is what usually comes to mind when people think of a charitable organization. Here's how the IRS describes the exempt purposes of a (c)3 organization:
The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.
None of these purposes is even close to the stated goals of the Salem Main Street Association. So the City of Salem shouldn't be giving money to a group that has wrongly classified itself as a 501(c)3 organization instead of a 501(c)6 organization.
Here's part of the IRS description of a (c)6:
Section 501(c)(6) of the Internal Revenue Code provides for the exemption of business leagues, chambers of commerce, real estate boards, boards of trade and professional football leagues, which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.
A business league is an association of persons having some common business interest, the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit.
...Chambers of commerce and boards of trade are organizations of the same general type as business leagues. They direct their efforts at promoting the common economic interests of all commercial enterprises in a trade or community, however.
Now, this accurately describes what the Salem Main Street Association is all about. It should have been organized as a 501(c)6 organization, since it seeks to promote the common economic interests of all downtown businesses, property owners, and residents.
So you might be wondering, why is this a big deal?
Well, once I was the executive director of a genuine 501(c)3 organization, Oregon Health Decisions (a bioethics organization). These are some of the problems with the Salem Main Street Association being wrongly classified as a 501(c)3.
Donations to a c(3) are tax-deductible, while donations to a c(6) aren't. Thus the Salem Main Street Association is competing for tax-deductible donations that are only supposed to be available to genuine charities, not business leagues.
Also, there's the potential of business owners getting a tax deduction for a contribution to the Salem Main Street Association, which then engages in promotional activities that benefit those same owners. I'm not saying this has happened, or will happen, but the possibility of it happening is another reason for concern about the Salem Main Street Association being wrongly classified as a 501(c)3 organization.
Another way of putting this is that charitable contributions are supposed to broadly benefit people in a community, not specific business owners.
As noted above, the City of Salem needs to reconsider its policy of giving money from Parking District funds to the Salem Main Street Association, at least until the Association reorganizes itself as a 501(c)6 organization.
Bestowing those funds simply isn't right given that the Salem Main Street Association isn't an actual association, lacking members, and that the Association has wrongly incorporated as a 501(c)3 charitable organization.