Here is the information obtained from the Indiana State Attorneys office regarding the questions raised at the annual Harrison County Ag Society annual meeting in November. We would also thank state representative Rhonda J. Rhoads, Ron Simpson and Leslie Vidra and others for all there help in clarifying this issue. Hopefully we can put this behind us and move on with making this the best and oldest continuous fair in Indiana. Below is the information from the Attorney general. According to IC § 23-17-1-1(a), the Indiana Nonprofit Corporation Act (INCA) applies to all domestic nonprofit corporations as of August 1, 1993. IC § 23-17-8-3 makes the purchase of a public benefit corporation membership illegal which is what Harrison County Agricultural Society’s current shareholder status allows members to do. If the Society changed from a shareholder corporation to a membership corporation, requiring members to pay a membership fee is in accordance with INCA because IC § 23-17-7-2 allows a corporation to admit members for consideration that is determined by the Board of Directors. I did not see anything in Harrison County Agricultural Society’s bylaws about transfer of membership rights and some of the pages of the Articles of Incorporation were unreadable. IC § 23-17-7-5 forbids transferring membership rights if the transferal is not authorized by articles of incorporation or bylaws. As a result, I do not think that they can pass on stocks that represent purchased membership from one person to another. Harrison County Agricultural Society’s shareholder status per se does not violate 26 U.S.C.A. § 501. According to § 501(c)(3), a public charity is prohibited from organizing and operating a corporation so that its earnings “inure to the benefit of any private shareholder or individual.” 26 U.S.C.A. § 501 (West 2014). The Society cannot let the shareholders financially benefit from the corporation’s operations because of their personal involvement. Even though §501 does not prohibit public charities from having shareholders, INCA prohibits individuals from purchasing membership. As a result, Harrison County Agricultural Society would need to change its structure from a shareholder corporation to a membership corporation.
Posted on: Mon, 15 Dec 2014 18:29:46 +0000
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