Federation Incorporation

From Earth Science Information Partners (ESIP)

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Should the ESIP Federation incorporate itself as a non-profit membership organization?

The view from 2014. NOTE: incorporation as a single, membership organization was accomplished in 2017.


When the ESIP Federation was starting out, the original ESIPs were those projects chosen to enter into cooperative agreements with NASA's Mission to Planet Earth effort. Because of guidance from the National Academies of Science, NASA inserted language into these cooperative agreements that required ESIPs to collaborate in a federated manner. During the spin-up of the original governance scheme (which created the ESIP Constitution and Bylaws) working groups examined many types of potential supporting organizations, including the following: 1) incorporating the Federation directly; 2) having NASA continue a separate Cooperative Agreement for a home office in an existing organization (such as SAIC, UCAR, or a university), and, finally; 3) creating a new, tightly controlled but separate non-profit foundation. After much deliberation, the Foundation for Earth Science Information Partners was incorporated, and has served as the home office for the Federation for more than a decade. The Foundation Board was set up as a proxy for the Federation Executive Committee, with elected Federation officials in the majority of board and its officers. This basic isomorphism between the Foundation and the Federation served to protect Federation officers from liabilities, as their actions were accomplished through their office as Foundation board members. It also served to simplify communications and support a congruence of purpose and vision between the Federation and Foundation. Recently, upon a legal reëxamination of the relationship between the Foundation and the Federation, certain legal opinions have resulted in fundamental changes in the makeup of the Foundation Board and in the Federation's knowledge about its own quasi legal status. The Foundation Board no longer even accepts elected Federation officials as members. The Federation has been advised that it is, in legal fact, an organization with all the legal liabilities of any organization, but currently few of the protections of actual incorporation.

The question at hand:

Whereas the Federation now is faced with the knowledge that it is a de-facto organization, is it now time to incorporate the Federation?

This question may need to be considered by the Federation ExCom, and eventually to be sent to the Assembly for discussion and a vote.

C&B/ExCom Discussion

(Please add your questions and comments here)

Would the ESIP Federation be incorporated as a 501 (c) 3? Or does the Federation want to explore other options (e.g., as incorporating as a 501 (c) 6)?



Why didn't the Federation incorporate itself in the first place?

Incorporating the Federation as a membership non-profit corporation was the first choice of the original governance working group. (Creating the Foundation was the third choice.) However, one or two of the original ESIP members, already chafing at the requirement to collaborate (instead of just doing their own work), noted that their cooperative agreement wording did not require them to join an actual new organization. They suggested that all the ESIP cooperative agreements would need to be rewritten, and that their own research divisions would need to agree with these new provisions, delaying their work by months. This objection worked to obstruct incorporation as an available choice at that time. Others objected to having the home office as a project in an existing organization (unless it was their organization). So the Foundation was created as a compromise solution.

So, the Federation has been a de facto legal entity anyway all this time?

Apparently. ESIP falls into a category of unincorporated nonprofit entities, such as some home-owners associations, civic clubs, and sports teams. There is now a uniform law that covers these groups basically making them legal entities, capable of holding common property and being sued.

What would it take/cost to incorporate the Federation of Earth Science Information Partners?

With some legal advice on additional necessary wording, the Federation Constitution can become its corporate bylaws. To avoid confusion, the current Federation bylaws would be renamed (Charter? Working rules?, etc...). The election of officers is already a primary feature of the Federation's governance. These officers would constitute the board of directors of the Federation of Earth Science Information Partners, Inc., a 501 (c) 3 not-for-profit membership-led organization. In most ways, the resulting organization would resemble how the Federation/Foundation worked until the end of 2013. The main difference is that the Federation would be its own organization, with its own budget and overhead. The one-time legal cost of rewriting and submitting the proper paperwork would be something less than the expense of running the Foundation board (including travel to board meetings) for a single year. These costs can be paid through income from the ESIP summer meeting.

What are the benefits/costs of incorporating?

Becoming a full legal incorporated non-profit will provide the Federation with the same legal protections that all non-profits get under federal and state laws. There will be some expense to get legal advice on the incorporation paperwork. The Federation will be able to hire employees, enter into agreements, and write its own checks. The Federation will be able to purchase its own liability and directors and officers insurance coverage. All of the operational overhead will belong to the Federation and be spent by the Federation. The Federation will need to file informational returns to the US and state in which it is incorporated, just like any non-profit.

Why not just leave things as they are?

There is certainly another path forward that does not include the Federation incorporating. The Federation could continue to use the Foundation as its home office. The Foundation will continue to take an overhead charge from the Federation funding for its own operating expenses. The matter of liability coverage for Federation officers will need to be solved. A new formal agreement may need to be negotiated, as the current MOU may not be comprehensive (or legal) enough. While incorporating the Federation may be the most elegant solution over time (reducing the number of entities involved in Federation deliberations by 50%), continuing to work in partnership with the Foundation (or with a different organization) is another available solution.

What about the existing agency cooperative agreements with the ESIP Foundation?

These can be continued through their period of performance, or moved once the Federation is capable of receiving agency support directly. During the next round of funding and for the future, it would be likely that the Federation would itself be the direct recipient of all Federation funding.

What will happen to the Foundation for Earth Science Information Partners if the Federation incorporates?

The future of the Foundation would be up to their board of directors. As a 501(c)3 corporation they are free to seek outside funding to meet their goals. They are currently working on a strategic and business plan that would open up new possibilities for funding and work.

Could an incorporated Federation explore additional funding, say from private foundations?

The Federation would have all the capabilities of any non-profit organization. The Assembly and the ExCom can authorize new projects that can leverage Federation capabilities for the benefits of its members and the planet.

Why didn't the Federation realize at the start that it was actually a quasi-legal organization?

Probably because we are the Federation of Earth Science Information Partners, and not Earth Legal Information Partners. Nobody actually asked a lawyer this question for more than a decade. Now we know better.

Why ask this question now?

Recent reviews of Federation and Foundation governance and agreements has revealed that the Federation cannot be seen as merely a project of the Foundation, but rather is a separate legal entity with its own liabilities and responsibilities. The original isomorphic relationship between the Federation and the Foundation masked some of these issues. Today, the Federation is a robust community of Earth science data providers and users. It deserves to ask itself this question: Is it time for the Federation to incorporate?

Are there other options than to incorporate as a 501(c)3? What might the differences be?

There are other professional membership organizations, such as the Association for Women Geoscientists (AWG) that have a relationship with a foundation put in place to support them (for AWG, the foundation is the Association for Women Geoscientists Foundation, AWGF). From the AWG and AWGF Board of Directors, we received the following:

AWG and AWGF were intentionally established as different types of non-profit corporations. The founding mothers sought legal advice about their intended activities and were advised that the cleanest solution for accomplishing activities that can be seen as conflicting (keep reading) would be to have two separate corporations.
AWG is a 501(c)6, which is a mutual benefit corporation; AWGF is a 501(c)3 which is a public benefit corporation. Just as those names suggest, AWG was established to be an organization of like-minded members who would work together to support each other in achieving the association's intended goals. AWGF is NOT a membership organization, and it was established to take advantage of the tax benefits available to individuals who choose to support organizations that do work on behalf of the bigger world (bigger than a specific group of members). At the time of founding, one of the primary reasons for having the membership organization be a 501(c)6 was to avoid the constraints on lobbying that are a part of being a 501(c)3.
One of the trades you make when choosing to be a 501(c)3 is that you give up most (but not all) ability to use the corporation's resources for activities whose goals are to directly influence public policy (less precise translation: 501(c)3 corporations can spend only a tiny [I can't remember how much] fraction of the corporation's resources on lobbying). So, functionally a 501(c)6 is not limited in its lobbying activities, but cannot offer tax deductions to its supporters; a 501(c)3 can't lobby, but it CAN offer tax deductions to its supporters.
As we have tried to demonstrate by our actions and in our shared meetings, AWGF exists to do the work of AWG. That's why we pay part of the cost of the office, why we support AWG events (field trips, conventions, etc.), and why we require that AWG leadership provide us with priority lists for funding. Our work is in raising and allocating funds, in complying with best practices for foundations (audits, annual reports, etc.), and in providing the IRS with the materials required to maintain our ability to offer tax deductions to our supporters.

An issue to consider, if the Federation were to incorporate as something other than a 501(c)3, is whether being a 501(c)3 is a requirement for our agency funding, or if any government agencies have restrictions on membership to non-501 (c) 3 organizations.