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Why isn't DirectEmployers a federal nonprofit? follow this blog post

posted by on May 28, 2007

Direct Employers John's column this morning brought some questions that I was asking last month to the fore.

On April 12th, I realized that in spite of the DirectEmployer's Association very public trumpeting of their non-profit status, they never claim to be a 501(c) organization. (Check out their About Us page.)

I put in a call to their PR firm to try to find out why, and got the following response via email, confirming they are in fact not a federal non-profit:

DirectEmployers is incorporated in the state of Indiana as a non-profit corporation and is currently in the process of applying for a 501(c) 6 non-exempt status.

(501(c)6 status is the section of the federal tax code for nonprofit associations.)

This confused me, because DirectEmployers has been around since October 2001, which means that it has had nearly six years to do this application (In my experience, the application process is a simple one. We submitted the ERE Foundation's 501(c)3 application through our accountant, and it only took a few hundred dollars from beginning to end.)

At the time, I dropped the subject because I did not understand why an organization would choose to become a non-profit in the state of Indiana, but not be recognized by the Federal governement.

John's column presents one possible reason (though definitely not the only one) why DirectEmployers is not already recognized by the IRS as a 501(c) organization. I hope that there is a better one - one that presents them in a better light.

Given that a tremendous part of DirectEmployers brand and marketing is dependant on being nonprofit, and that they are now attempting to partner with the government's State Workforce Agencies to create a successor to America's Job Bank, they need to be above reproach on issues of governance.

This all begs several questions, which I hope that my friends* Chad and Bill at DirectEmployers can shed some light on.

  • Why is DirectEmployers not a 501(c) organization after almost six years?
  • Your PR firm said that the application was in process a month and a half ago. Keeping in mind that it is a process that typically takes hours, and not months, what stage is the application process in?

* Apparently the implied closeness of my relationship with Chad and Bill begged the question of why I did not contact them directly - see Carl and Bob's comments below. I did not mean to imply that we were close - only to describe our professional relationship in a friendly way.

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17 comments

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  • 1 point 2 years ago

    But I'm not apologizing for anything. ;-)

  • 1 point 2 years ago

    In retrospect and after talking with Dave Manaster on the phone yesterday I realized that I had also failed to pick up the phone and call Dave to resolve my issues with what he had published on his blog.

    In the heat of the battle, I accused Dave of hit and run, when did you stop beating your wife, you are guilty now prove you are innocent, Sumser-like ?journalistic? tactics. My comments were far too personal and far too critical. I was wrong in doing this and I apologize for doing so.

  • 1 point 2 years ago

    is much less than that of a Rottie. Thought y'all should know. ;-)

    Restaurant Jobs | Restaurant Recruiters >> Blog | Web Services for Search Firms

  • 1 point 2 years ago

    Let see if html works here.....

    Check out Carl's post

  • 1 point 2 years ago

    I have tried to respond to your accusations privately in an attempt to avoid embarrassing you publicly. Since you seem intent on making this a public issue, the answers to your questions are:

    1) Why isn't DirectEmployers a federal nonprofit? There is no such thing as a "federal nonprofit".

    2) Why is DirectEmployers not a 501(c) organization after almost six years? There have been no benefits to the organization to apply for an exempt status.

    3) Your PR firm said that the application was in process a month and a half ago. Keeping in mind that it is a process that typically takes hours, and not months, what stage is the application process in?

    The application has been prepared and signed however we are still evaluating whether or not it is in the best interest of the Association and its members to file the application.

  • 1 point 2 years ago

    Check out Bob Wilson's post...

    http://rmwilsonconsulting.typepad.com/job_search_engine_guide/2007/05/integrity_trans.html

  • 1 point 2 years ago

    Emailed by Dan Jordan 5/29 at 5:19pm EDT:

    Your posted questions are best answered by a discussion of the difference between a state corporation status of ?not-for-profit? or ?nonprofit? (as recognized by the state of incorporation) and a federal tax-exemption afforded some nonprofit corporations (granted by IRS registration). A ?not-for-profit? or ?nonprofit? state corporation status allows a corporation to operate without the parameters legislated and applied to for-profit corporations; whereas, the federal tax-exemption allows a ?not-for-profit? or ?nonprofit? corporation to be exempt from the federal income taxes applicable to taxable corporations (which are corporations formed under Subchapter C of the 1986 IRS code). The aforementioned state corporation status and federal tax-exemption are independent of one another; the federal tax-exemption for a ?not-for-profit? or ?nonprofit? corporation is not an absolute nor does it relinquish all tax liability for said corporation. The failure of a ?not-for-profit? or ?nonprofit? corporation to obtain a federal tax-exemption from the IRS has no effect of said corporation?s ?not-for-profit? or ?nonprofit? corporation status within its state of incorporation. Corporations that are ?non-for-profit? or ?nonprofit? are not required to request a tax-exemption from the IRS to validate there ?not-for-profit? or ?nonprofit? corporation status held in its state of incorporation as you suggest. Some ?not-for-profit? or ?nonprofit? corporations, including ?charitable? organizations do register with the state which they reside and even incorporate in that state as ?not-for-profit? or ?nonprofit? corporations and never apply for federal tax-exempt status. The disadvantage of this posture, of not obtaining the aforementioned federal tax-exempt status, that may be afforded a ?not-for-profit? or ?nonprofit? corporation, is that donors cannot take a tax deduction on their donations to said not-for-profit? or ?nonprofit? corporation, and said ?not-for-profit? or ?nonprofit? corporation cannot receive grants from foundations and/or other ?not-for-profit? or ?nonprofit? corporations.

    DirectEmployers Associations, Inc. (hereinafter DirectEmployers) is an Indiana nonprofit corporation formed pursuant to the provisions of the Indiana Nonprofit Corporation Act of 1991. The incorporation date for DirectEmployers is October 29, 2001. To date DirectEmployers has not pursued or received donations nor applied for or received any grants from foundations or ?not-for-profit? or ?non-profit? corporations; therefore, there has been no benefit lost by DirectEmployers, or its membership, regarding not obtaining a federal tax exemption in conjunction with its state nonprofit status. However, given the diverse nomenclature of projects that are currently being pursued by DirectEmployers, including its involvement with multiple government agencies, it is conceivable that in the near future that a federal tax-exemption, granted by the IRS, would be a benefit to DirectEmployers and its membership. Hence an application for said federal tax-exemption afforded a 501(c)6 organization has been prepared for DirectEmployers.

    DirectEmployers will continue to pursue all avenues that are available by law regarding the greater good of its membership and the human resource industry as a whole.

    Dan L. Jordan, Chief Counsel DirectEmployers Association, Inc. (Attorney #: 15899-49)

  • 1 point 2 years ago

    Thanks Carl. That's my point exactly. Manaster answers a question with a question by saying: "Aside from claiming that I have sinister motives here (without spelling out what you think that are)", I have not heard an answer to the two original questions:

    When you act in an accusatory, un-professional manner as Manaster has done it cannot be for noble reasons. As he said, we have not talked for years, if ever, and he makes unfounded public accusations and then asks for a response --- without even a phone call to get any facts.

    As I said, our web site has extensive information about our legal structure including bylaws and governance structure. After what I have accomplished in this industry, I certainly do not owe Manaster any response at all. However, I have asked our attorney to prepare a response since the questions were asked in an accusatory manner in a public forum without our knowledge or ability to respond.

    Unfortunately, the online recruiting industry is inundated with people who have accomplished little or nothing themselves but want to make a name for themselves at the expense of those who have made significant contributions to the industry.

    Setting yourself up as a "self appointed" Internet pundit carries a certain amount of responsibility. If nothing else it calls for certain level of common decency. There are too many people, including Manaster, writing about too many things in this industry that they know nothing about. He obviously has no concept of how organized are organized and managed.

    It is embarrassing to have this type of "journalism" in our industry.

  • 1 point 2 years ago

    Dave, you avoided my questions numerous times and your only retort is that "they employ an outside PR firm" [paraphrasing here] so that must make the PR firm the definitive source!?!?!?!?!?!

    If you were going for transparency, I think you have achieved it. It is 'transparent' that you have an agenda beyond knowing the answer to your two 'questions.'

    If you wanted the answers to the questions, then all you had to do was get on the phone an ask. If stone-walled then you could choose a course of action that might include public accusation and recrimination. That isn't what you did. You put the cart before the horse, accuse now, publicly humiliate, then give them a call.

    Looks like a case of "rush to judgment" my 'friend.' And if you want to treat me the same way that you have treated Bill and Chad, I'd just as soon rather NOT be friends. I don't employ a PR agency, so if you have the need for answers, you can call me any time. My numbers are quite public. -Carl

  • 1 point 2 years ago

    I'm sorry David, I thought you had my number also...

    317-874-9003

  • 1 point 2 years ago

    Bill -

    As I wrote in my post, DirectEmployers is not a 501(c) organization, nor have you ever claimed to be.

    Aside from claiming that I have sinister motives here (without spelling out what you think that are), I have not heard an answer to the two original questions:

    * Why is DirectEmployers not a 501(c) organization after almost six years? * Your PR firm said that the application was in process a month and a half ago. Keeping in mind that it is a process that typically takes hours, and not months, what stage is the application process in?

    I just called your office and was told that you will be out until Thursday. I left a message with the nice woman who answered the phone.

  • 1 point 2 years ago

    ...and I have removed it from the post. I've met Chad a couple of times at events, and I have not spoken to Bill in years. I used the word to describe an overall positive relationship, not to imply that we were best friends.

    As to why I went to the PR firm, I was not trying to avoid the question either time that it was asked. Let me try again:

    DirectEmployers pays their PR firm to answer questions from the media. That firm is the established channel for inquiries into the company, and in that capacity, they function as their "official spokesperson."

    The PR firm answered the question simply and factually - DirectEmployers is NOT a 501(c) organization - I saw no need to ask the same question to Bill or Chad.

    I do think that it is important that the final pair of questions be aired publicly. It's puzzling why DirectEmployers did not apply earlier for federal nonprofit status, when it is so central to their marketing and positioning.

    As I wrote in the original post, I'm sure there are reasons why DirectEmployers has not completed the application process, but I can not fathom what they are. Without a comment from them, it does not look good on the face of it.

    I hope that someone from their organization can give a more benign reason than the one that John suggested.

  • 1 point 2 years ago

    DirectEmployers Association received the following email AFTER Manaster's post this morning:

    Hi Chad,

    I posted a few questions regarding the nonprofit status of DirectEmployers on my blog today, and wanted to give you a heads up on it, so you will be able to respond.

    Regards,

    David Manaster CEO ERE Media, Inc.

    This puts Manaster and Sumser in the same pathetic league of "self-proclaimed Internet Journalists". This type of shoddy "reporting" is not needed in our industry.

    This is the blogging equivalent of asking "When did you stop beating your wife?" Manaster makes a very public statement implying wrong-doing and then ask someone to defend it.

    DirectEmployers Association's web site very clearly states our corporate status, mission and goals. If either Sumser or Manaster has additional questions all they need to do is pick up the phone and give us a call. I will personally go to great lengths to keep them from further public embarrassment.

    Bill Warren Executive Director DirectEmployers Association 317-874-9001

  • 1 point 2 years ago

    As of today, ou are officially my friend too, Carl!

    As I stated earlier, I picked up the phone and called the principle at their PR agency to get a definitive answer on their legal status. I received a confirmation from their designated press contact. Short of walking you into the IRS office and asking to see the paerwork together, I am not sure how I can convince you further.

    DirectEmployers employs a PR firm just for cases like this, and I am not sure why the information in my post is less valid for having come from DirectEmployer's spokesperson.

    I am confused as to why you think that I would have any agenda beyond what I have stated in my post, but I can assure you that it is not the case.

  • 1 point 2 years ago

    Dave -

    Why not just answer my question? Why didn't you call Bill or Chad to get the info?

    Why not check your facts with people whose job it is to KNOW, who actually make the decisions about the tax status of the entity?

    Why make a post like yours, which IMHO, is designed to cast doubt, suspicion and create an atmosphere of distrust, without being 100% certain of your facts? Why lead your readers with implication, to an inference that is most probably incorrect? Why not talk (yes actually pick up the phone and call) the principals of DEA and ask them directly?

    Surely Bill or Chad would be a much better source than the PR firm, don't you think? After all, they are your friends, right?

  • 1 point 2 years ago

    Carl -

    I've tried to be pretty transparent about my thought process in the post. I did not have any communications with John about this or DirectEmployers in any way before writing the post, although I did send him an email to let him know that the post was up after the fact. I sent a similar courtesy email to Chad at DirectEmployers.

    To be clear, I did check my facts. I contacted DirectEmployer's PR firm, The Steven Style Group, which seems to me to be a pretty reasonable way to find out definitively what their legal structure is. Steven said that he would check with DirectEmployers and then responded to me via email and definitively stated that they are not a 501(c) oganization.

    As I said in the post, I think that with DirectEmployers repeatedly touting their non-profit status in their marketing, and vying to run the successor to America's Job Bank, that this is more than an academic question, and deserves to be publicly addressed.

  • 1 point 2 years ago

    If Bill and Chad are your friends, why did you not call them to ask your questions directly, before trying to bring public suspicion with this post?

    Seems to me that for someone who touts transparency your post looks fairly coordinated with John's, and your agenda seems somewhat suspect.

    Why did you choose to air what you think is dirty laundry without first checking your facts? Certainly you don't think that all PR firms are current on every aspect of a business' structure or tax status do you? Sorry Dave, but this one is a head shaker for me, and not because of the actions of DEA.