For some time now I’ve been puzzled by ACMOC’s toy business and its tax exempt character. Those who’ve read my posts on this BB are well aware I’m opposed to the way this Club is managed but I haven’t said much lately because I felt my comments were having a negative impact on the handful of folks who give so much of their time to those interested in all things Caterpillar. A while ago many of you were shocked when I said the BOD was running this Club into the ground and they needed to move on. I believe the Financial Statement is now catching up to my comment and the Club is running out of time. The bottom line is this, in order for the hard work of the few to live on, this Club needs to be a solvent and well managed entity. I doubt many would disagree with that concept so I ask you to think about the following.

Acmoc, as presently structured, survives on its toy income. If you’re not aware of this, a review of its tax returns will make that apparent. What isn’t so obvious is the assumption everyone is making about the character of that income, that it’s all tax free because Acmoc is a Non Profit Organization (“NPO”). This couldn’t be further from the truth. If you want to test that assumption, just ask yourself, how does a NPO engaging in a commercial activity derive tax free income when everyone else in the same business has to pay taxes. For that matter, why can’t we all just convert our businesses to NPO-s and do the same thing. The answer is simple, “because the tax code isn’t that simplistic.”

As a general rule, income from a business activity, unrelated to the NPO’s exempt purpose, is taxable as Unrelated Business Income (“UBI”). For those of you who are wondering what UBI is, let me first say that the tax code is a mystical and magical document and can be many different things to many different people. It is sometimes selectively enforced and those with more political clout often fare better than those who don’t. As a general rule, UBI is income from an activity which is not substantially related to the exempt purpose for which the NPO was established. So, for example, if Acmoc started manufacturing soda pop, soda pop would be unrelated to preserving all things Caterpillar and any income from manufacturing soda pop would be taxable. In the same manner, marketing commercially licensed toys to members and to the general public may have little to do with preserving all things Caterpillar, so the question is, is the toy income taxable.

The tax code is full of exemptions and exceptions and these are effected by regulations and case law but they all have one thing in common, exploitation of an exempt function for a commercial purpose does not create tax free income. Over the years much has been written on this BB about Acmoc’s toy business. From what I’ve read, it appears to me that Acmoc got into the toy business because one of more of its directors were toy collectors and because the toys would generate a lot of revenue for the Club. It was all about the money then and still is all about the money today. There are a couple of things one needs to keep in mind about the tax business. First, you can be a bull and you can be a bear, but you can’t be a pig. Second, the form of a taxable transaction won’t make it tax free when the substance of the transaction makes it taxable. The BOD and those in tow can go on and on about how marketing toys has something to do with educating the general public about Caterpillar’s role in shaping world history but they can’t ignore all they’ve said publicly on this forum over the years about Acmoc’s real motive for selling toys which is, toys bring in the bucks they spend. I believe Acmoc’s toy business, in the context within which it has been operated, has little to do with preserving Caterpillar history and instead has become a commercial exploitation of an exempt function.

So, to get to the point, with all this toy revenue spent on expenditures to build an organization worthy of the BOD-s, what’s going to happen if all that revenue wasn’t tax free and all those expenditures weren’t tax deductible. How would Acmoc pay the tax bill. What happens to this BB and all the hard work that a hand full of folks expended making it what it is today. Acmoc may get lucky and never face this issue in an audit but that doesn’t minimize the fact it may be harboring an undisclosed liability that can destroy it rather quickly. I believe this is an issue that needs to be opened up, aired out and repaired before it becomes terminal.

I'm all for moving this organization forward and I have some ideas along those lines. What I'm not willing to do is strengthen those currently in charge. They've shown they're not going to willingly give up their power and their attitude is "if you don't like it, you can leave." Sending them money doesn't help the situation. This is not the first NPO to go through something like this and it won't be the last. In fact, I'd say this is quite common. If we want change, change will happen. Otherwise, we will be left with the organization we deserve.

Old Magnet, dump away. Its O. K. I'm used to it. In my life I'm surrounded by women, I have the daughter at home (used to have two), the wife, Garlic Mom, only have a sister, work with an office of ten women and one other man, work regularly with another organization where there are four girls involved and two other men. Let's just say I have a strong ear.

This banter is, I think, very helpful and productive. All of the current Board Members are aware of this discussion and have had an opportunity to read it. Most have commented to me about it one way or another. Some have participated in the discussion to some degree. The Board divides up the business of the Club into operational areas and we each have certain responsibilities. These discussions have touched on most of those operational areas. The pertinent thoughts and suggestions are getting to the appropriate Board members and I believe you will see some of them implemented.

I can tell you that most, if not all of them are being discussed and considered. I know this because I have discussed this thread and the suggestions with them. Some of the suggestions fall into areas that I help manage, and the people I work with are working on those suggestions.

Because we each have different areas of responsibility, different time commitments and different skills and abilities, I don't think it is reasonable to expect that all Board Members will be as active on the bulletin board, or in this discussion, as I am. Frankly, a lot of the time I shouldn't be spending so much time on here, either. I will continue to participate, bringing my impressions of the actions of the Board to the bulletin board and bringing the thoughts of the group here to the Board.

We have an active request in to be trained to update the current Members' Area of the website. Ianoz commented that the area had recently be cleaned out. I suspect that is because of my request. When we get trained in maintaining that area, we are going to post a listing of and the text of each Resolution passed by the Board. Phildirt made this suggestion in an earlier discussion, I think it is a good one and one we can accomplish without too much additional time and trouble, but it takes time to get things done.

I know Bruce is noting the bulletin board operations suggestions here and will implement those that make sense, when they make sense. A lot of time and effort is being expended on the upgrade now, and many of the suggestions are dependent upon the upgrade being completed, or would divert resources from the upgrade if implemented now.

The suggestions about accumulating the service bulletins and other technical articles in an archive here have also been put on the shortlist of improvements. Here again, the upgrade probably needs to take priority, but those will be worked on.

The similar suggestion about beginning to include technical and historic marketing items in the magazine has also been acted upon. We recently had a change of editor. The new editor is getting his feet under him, but he has a strong career covering Caterpillar as a business. He mentioned this suggestion to me in a recent email and is going to pursue that suggestion. He also mentioned reproducing this discussion, as much as possible, in the magazine for the benefit of our non-bulletin board user members.

I know the battleship is taking on water, but it wouldn't make sense for everyone to abandon the pumps to come participate in our discussion, either. We need the various participants to keep the rest of the business of the Club running, while we here work on this part of the business.

I agree, keep the responses, comments and suggestions coming.

The frustrating part to me, though, is that more people don't choose to get involved and help. For as many comments about how we are a tough group to convince, and we are a bunch of good ole' boys working in the dark, not one person has been turned away from participation on a Committee, not one Board candidate has been rejected since I've been here for three years.

The only commitment is a willingness to participate in a monthly (or less) free conference call for the area in which you are interested. I even have Committee members who don't participate in the call, but they help by email or by telephone separately. If you are frustrated with our leadership, our attention to a particular area or what the Club is doing, why not come on in and change what we are doing? We will welcome the help, and I hope that some of the group here could join my voice to the Board, and join my voice from the Board back to you here.

I'm not going anywhere, I'll be here, at least telling my silly stories and posting pictures, and telling you what we're doing and why, and listening to your suggestions. I'd really like to see some more from here get involved, though. It is a lot easier to add a voice who already uses the computer and this forum to the management group, then it is to divert an existing manager who is already working on an important area of Club operations and get him to use a computer and start participating in the forum.

Pete.

Garlic Pete,
Again thank you for your response but I think you are missing a point.
The days of accomodating individual limitations on communication have run their course. If the computer can't be mastered by these individuals then get someone that can. Not asking them to be technological wonders, just change the method, any incremental attempt will do for a start.

Same goes to the participation you are looking for. What we see is there is no shortage of participation, just not in the form your looking for. The method of individuals chasing down an individual for one on one phone conversation are essentially finished. It's going to be open dialogue or nothing.

Interesting commentary just posted, thanks Mike Walsh. Now we find ourselves in a potential libility situation involving UBI sales. How did we get in that situation. Exactly the type of situation that moves towards a "No Confidence" vote on the administration.

Mike Walsh, I see we posted at the same time.

You are absolutely correct in your assessment of the definition of unrelated business income and the classification of the models business. You are also correct in your analysis of the legislative intent underlying the tax code about that issue.

The Club's tax return for 2004 was audited and this issue was identified as a concern. Prior to that year, the Club had just filed not-for-profit information returns and had not classified any of its activities as unrelated business and had not paid tax on those activities. The issue was resolved at the closure of the audit of 2004 by the Club agreeing with the I. R. S. agent's position, adjusting its tax return and paying a small amount of tax on its relatively small unrelated business income, along with some very small penalties.

The Club's 2005 tax return was amended, and its 2006, 2007 and 2008 tax returns were filed with unrelated business income segregated and properly reported and a small tax liability was paid with the return. The tax preparer for the 2009 and 2010 return failed to segregate the unrelated business income. That preparer was a Certified Public Accountant and a Tax Attorney and she took the position that the segregation was not required. I came into the picture in January of 2011. I am a Certified Public Accountant, but not a tax attorney. I listened to her argument, reviewed her research and recommended that the Board find another advisor. There were many reasons for that decision, but the quality of her research and her arguments about the treatment of unrelated business income were among my reasons.

For the 2011 and 2012 tax returns, we have returned to the strategy in parallel with your description. We file an unrelated business income tax return, allocate revenues and costs among the various programs, including the models business and pay tax on the net profit from the models business. Last year our tax liability on profits from models was about $1,600. I am confident that I can defend our current returns to taxing authorities and have the figures as we have reported stand as correct and proper.

Gauntjoh - Thank you for your comments.

Content for our magazine is collected, edited and the layout of the magazine is done by a contract publishing firm. They do occasionally provide content, but mostly try to gather content produced by members or other interested parties. We pay a flat $4,550.00 per issue for this service. For this fee, we have the equivalent of almost one full time person dedicated to gathering and editing of content, assembly, ad production and everything that goes into production of a print ready four color issue. We don't have the luxury of a member with the skills that you in the Link Club have to do this work for us. It would be wonderful to have such a resource, and maybe this discussion will reveal one out there.

We continue to think about four issues versus six issues per year. Overall, I don't think we're short of content, as we've discussed here, we have all kinds of technical bulletins, service information and other stuff that people would like to see. We can fill the pages. Hopefully people like Naylorbros will come around and decide to send in their articles and information, too. We felt that the majority of the membership, a large part of whom still have the magazine as their main connection to the Club, would be disappointed if we went back to four issues. We could clearly save on printing and postage. Our publishing costs, however wouldn't decrease as much because we'd have to pay somewhat more for each issue if we published less frequently. I'm sure that annual issue count will continue to be an active topic for some time.

I know that subscription collection and remittance was one of the core issues which led to the decertification of Chapter 2. As I said, I wasn't here at the time and wasn't involved in those discussions. I have reviewed some of the financial concerns and the related notes from that time, though. I can tell you that I don't understand why our Club had such a concern with the remittances. I do understand their concern to ensure that all Chapter 2 members were properly paid ACMOC members. We require that of every other Chapter and should not make an exception for Chapter 2. There appeared from the notes, though, to have been a concern about the timing and amounts of dues being remitted by Chapter 2.

I don't have all the information before me, but from what I do have, I was perplexed about why people on our side were so concerned with the timing and amounts of the remittances. This is one of the issues I alluded to when I mentioned personality or cultural differences. It appears to me that some of the problem frankly came down to people on our side not being able to understand the vagaries of currency conversion and international payment timing and explanations. It is unfortunate, but in this situation, I think maybe we just didn't have people with the proper background and experience handling the transactions and that looks to me like it led to misunderstandings.

That is all water under the bridge now, it can't be repaired any more than it already has been. I'm glad that the Link Club has survived and flourished, I'm glad that we have a Chapter 2 in the U. K. again and I'm glad that they can work together to complement each other. I appreciate your invitation and hope to take you up on it one day. Unfortunately, I don't think I can make it to Casterton this weekend, although from previous pictures, I don't doubt I'll be sorry. The same invitation applies to you if you do make it over here.

Old Magnet - I know and mostly agree with your perspective about communication. I'm just stating the facts, and also gently reminding that there is a lot of time to be spent operating the Club outside of communicating on this bulletin board. We need all the work to get done, and are using up most of the time the participants can afford to spend, keeping those operations going.

Pete.

I think it is great more and more of our disenfranchised senior members are coming into this discussion, that is what I had hoped. What I have been hoping all along is that experts in the fields ACMOC need to operate successfully are drawn in to help resolve some of these issues in a more efficient and economical way, for example Mike Walsh's interesting discussion on our potential tax liability from toy sales has alerted the BOD that income from previous years maybe audited, and ACMOC hit with a tax bill based on previous profit. As I understand it Mike is a Forensic Lawyer who specializes in Accounting issues, so a really handy person to have onside if the U.S. Tax Office do ask for a audit of ACMOC's books.

What I can guarantee you is that in amongst the 2,900 Financial Members of ACMOC, and the 14,000 Forum Members are the people who can solve all our problems if not for free, at very modest cost, whether it be Financial Integrity (very wealthy folks who donate to specific projects or just guide us financially), or Computer Services (people who own and run their own computer business's), or Magazine Publishing (folks who own their own printing companies, as John Gaunt mentioned), or Legal Support (Lawyers like Tom Madden and Mike Walsh), or Financial Consulting (top line Accountants like Peter Bloom and BarstartSue), Caterpillar Historical Technical Experts (like naylorbros and Kent Bates), or Human Resource experts (needed to keep everyone on the same page) to name the main issues of running any corporation successfully.

What I have trouble resolving in my mind is the enormous power and control Cat. Inc. appear to have over our activities and I have said this previously that I do not like the idea that ACMOC is used on a regular basis as a marketing tool by Cat. Inc. to sell new machinery in 2013, yet their Lawyers have historically used what appeared to me to be excessive and impolite force on little ol ACMOC, for example on using the word Caterpillar in the Chapter 2 magazine. What a crock of baloney, Cat Inc are getting millions of dollars worth of free marketing each year from morons like me around the world who spend tens of thousands of their own hard earned after tax dollars, and thousands of hours free labor, to bring life back into antique Cats that should have gone to China as scrap, and Cat Inc are more than happy for us to provide them at no cost what so ever beautifully restored crawlers for their marketing events, or at the hundreds of old machinery rallies we all attend throughout the year all around the world.

Yes, we are allowed to reproduce Cat items pre 1960 or whenever, but that's only because Cat Inc already know those items are only nickel and dimes in potential profit, I mean their Accountants told them 20 or 30 years ago to melt down hundreds of millions of dollars worth of brand new parts we desperately need now when they abandoned their "No Orphan Policy". I think it is critical the relationship between Cat Inc and ACMOC is respectful of each others needs, but that we remember clearly that we are not employees or the Marketing Department of Cat Inc, and here we are worrying about how to find $14,000 for a computer upgrade when the Cat Inc in house Marketing Team probably spend that much per hour 24/7, 365 days a year selling new machinery. They must laugh their heads off reading our posts here, and I will not join the Australian Chapter of ACMOC if I believe Cat Inc will have any significant influence over the members of that Chapter.

This current BOD of Directors have inherited a few sows ears and I hope this frank, open and polite discussion we are having here will continue to drag back in more disenfranchised former members from around the world, and inspire new members to join financially who have been watching quietly for months and years, because I think the fact we are talking here means we care, and I for one appreciate other people joining in this conversation so we can maybe make a few silk purses out of those sows ears.
Sincerely
Mike

I have been following this thread on and off for the last week. I dont contribute very often but am a pretty avid reader.
A number of commentators have talked about the services ACMOC can provide to members as the primary function of the club rather than toy sales.

Just my thoughts but why is the club not flogging these toys in a fully fledged commercial capacity? The biggest market for toys/models is kids - not collectors.

On amazon i can buy all sorts of CAT licenced gear but not a D2 model.
On ebay there are toy shops reselling acmoc toys at a significant mark-up on the ACMOC stores prices.

At the moment are sales restricted to members and the public who attend acmoc functions or stumble across our website?

A commercial manager would be able to cast a discerning eye over future model being made and make an objective decision on weather they will sell or not.
I Just visited the store for the first time in a while. Who is going to buy a $200 scraper attachment to go with a DW20 model? parents of young kids? i dont think so.

If toy/model sales are going to be the life blood of this club then maybe its time to get serious about it.

Garlic Pete. Thanks for updating me re the amended returns. Of those I was not aware. From what you've said, Acmoc would have to have booked a great deal of its expenditures to UBI in order to achieve such a low tax liability. I'm not privy to the facts so I can't comment. However, the flip side to that is models aren't that profitable. If model revenue is just a tad more than model expense, why is this Club in the model business. They suck up a lot of resources and apparently are not providing much useable revenue.

OM and Mike Meyer, thanks for raising the issues you've been raising lately. Folks on this BB know you guys mainly from your postings here. I hope they start to figure out you guys have been around and your experience is not limited to nuts and bolts. If you don't know John Gaunt, you might want to PM him one of these days. He is someone who could do a lot to save this Club from itself and if persuaded to help, has the credentials to do so. As Mike Meyer mentioned, this Club is full of amazing resources that it doesn't make use of.

Here's three ideas of a positive nature. 1. Offer all Ex-Chapter 2 members a no frills membership at no cost to them; no magazine, ect. They have their own. If you want to extend an olive branch, its a start. 2. Get with the Link Club and figure out how to combine their magazine with Acmoc's. I think Acmoc will end up with a better product at a far cheaper price. 3. Magazines are going digital. Scrap the paper magazine for a pdf email for all those who are willing to participate.

This stuff takes no imagination to come up with. It will all reduce the Club's expenses. Perhaps I'll hear its all being worked on but I'm one of those guys who doesn't much care about what's being worked on. I only care about what's been implemented. To repeat what OM just said, if the Club doesn't have the people who can make things happen, get someone who can. It costs the same either way.

Nice to see you back up at the Batters Plate Mike Walsh, I figured you were keeping track of this thread, I like your suggestions, particularly about adding the Link Magazine to the ACMOC magazine, that would make for a very interesting read to all our international members, and help reconnect genuine Cat enthusiasts around the world.

When I talk about the depth of talent we have in our membership base I'll use a good example of one of our real nice members Casey Root and his sweet wife who ran a successful Publishing business there in California for many years but recently had to put it in mothballs due to the post GFC economy, they are now slowly ridding Montana of ground squirrels one at a time while nursing coal seam gas infrastructure, two very worth while endeavours you will agree, it is the good ACMOC folks like Casey and his wife we should be asking for expert help, Publishing Experts, and throwing a few dollars their way, supporting our own members, because they understand exactly where we are coming from on this old Cat journey, but more importantly, they know where we are heading because they have their own old Cat too.

There's a lot of nice folks around on committees who are real good at talking, but not real good at listening, and it's important in any successful corporation as you know Mike, to get that ratio right, you can't have all yes men, but you also can't have all no men. Peter Bloom is coming across here as a guy who is able to do both tasks well, listen and talk, and to be honest I'm a little worried he is giving us mere males a bad name because we are not mean't to be able to multi task and do 2 things at once, like talk AND think at the same time, unlike the brilliant women in our lives who do that 24/7, raising families and running loving homes while often working full time, AND, often helping run or do the catering for the ACMOC Chapter meetings for their husbands or partners.

Keep swinging that baseball bat Mike Walsh as good as you can, and all you other good folks now chiming in, because ACMOC are going to start hitting a few balls out of Candlestick Park I reckon with some fresh passion and talent in the batters pit.
regards
Mike

"Old wrote:

Garlic Pete,
Again thank you for your response but I think you are missing a point.
The days of accomodating individual limitations on communication have run their course. If the computer can't be mastered by these individuals then get someone that can. Not asking them to be technological wonders, just change the method, any incremental attempt will do for a start.

Same goes to the participation you are looking for. What we see is there is no shortage of participation, just not in the form your looking for. The method of individuals chasing down an individual for one on one phone conversation are essentially finished. It's going to be open dialogue or nothing.

Interesting commentary just posted, thanks Mike Walsh. Now we find ourselves in a potential libility situation involving UBI sales. How did we get in that situation. Exactly the type of situation that moves towards a "No Confidence" vote on the administration.

Old Magnet ,You started this thread mainly to ask why the money allocated in the budget had not been spent to sort out the problems you were experiencing here on the BB .. Some very interesting things have come to light .
From what I see,you are suggesting removing the board ..
We have Pete here putting across his views ,and good on him for doing this .
But remember there are other BoDs reading this .
You are questioning why this board should not be removed .Now weather you like or approve of Bob Stewart or Byron Heal .Bob was ACMOC Man of the year .Byron A committee Member . They did not toe the line and were Banned . Now except for Lance Jones , there is the same group of directors here reading your calls why they should not be removed .
Ok You say your not worried if you are banned .
I don't know where this will all end up .
If all the Directors stand down,Who is going to pick up the pieces .What is there to pick up ? Making models is not working .It was pointed out in an earlier post that the standard of the manifolds coming out of the molds donated to the club needs looking at .As far as making parts go .no body is making a fortune out of it ,so how can the club ?As far as Club members go .The model collectors want Models and the tractor restorers want parts .The likelihood of either happening gets more unachievable as the bank balance drops .
Mike Myers ,How hard is it to look at the home page of the forum to get facts right .There at this moment are 16263 forum members .With a click of a button whoever is looking after the forum can give you the number of Active forum members .A lot of forums do show that info .Members numbers is a badge of honor .So you want to strip out all the Dead wood ..So if that shows {we will do a Mike Myers here and pick a figure out of the air } 300 members use the forum regularly.Now this years budget for the web site is 22000...Lot of money for a few people to use .
User pays to ask a Question ,Mike there are plenty of forums out there With members like Old Magnet And EddieB Quite happy to help people out .Eddie will help people out on ACME or wherever .
Old Magnet visits many other forums helping people .
If the chapters in Australia grow as well as the original UK Ch2 I see the same thing happening here .Why pay for a Magazine that has little to do with local area..Now if Lances newsletters grow into a fully fledged magazine Are Aussies going to sit back jumping though hoops to be told what we can and can't put in a magazine .