Subject: IFCSS HQ Special Report 4013: IFCSS Lobby Status

From: IFCSS HQ <[email-masked]>
Date: Mon, 27 Jul 1992 11:32:01 -0400

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IFCSS Headquarters Special Report No. 4013       July 27, 1992
                 "IFCSS LOBBY STATUS"
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Independent Federation of Chinese Students and Scholars (IFCSS)
   733 15th Street, N.W., Suite 440, Washington, D.C.20005
         Tel. (202)347-0017  Fax: (202)347-0018
                Email: [email-masked]

           Certain Facts about IFCSS Lobby Status
           ======================================

Dear IFCSS Members:

     Yestoday, IFCSS President Geng Xiao, sent a memo
to IFCSS Council to clarify certain facts about the
lobby status of IFCSS (see attached memo). This question
has bothered IFCSS for three years. This memo provides
some vital information and explanations long overdue.
Comments are welcome.

     Thanks for your attention.

Enclusure
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IFCSS HQ Memo 4002
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July 26, 1992

To IFCSS Council

       A Message from Geng Xiao, President of IFCSS
                           On
          Certain Facts About IFCSS Lobby Status

Honorable IFCSS Council Members:

     There has been an opinion circulating among the
CSS communities that IFCSS cannot engage in lobby
activities and that the IFCSS account cannot accept
donations for the purpose of supporting the 1992
Chinese Protection Bill. In order to clarify the matter,
the IFCSS HQ consulted attorneys and re-examined the
Corporate Records of IFCSS. The conclusion is that it
is perfectly legal for IFCSS to engage in activities in
support of legislation and regulations which protect
and promote the interests of Chinese nationals residing
in the United States and to accept donations for that
purpose.

1. THE IDENTITIES OF IFCSS

    The so-called IFCSS is actually two corporations,
one is a charity organization, often referred as a
501(c)(3); another is a social welfare organization,
referred as a 501(c)(4).

    A. The 501(c)(3):

    On August 14, 1989, Mr. Han Lianchao filed with the
Maryland State Government the "Articles of Incorporation
of the Independent Federation of Chinese Students and
Scholars, Inc." This corporation was incorporated as a
501(c)(3). On November 3, 1989, Mr. Han Lianchao filed
with Maryland Government the "Articles of Amendment of
the Articles of Incorporation of the Independent
Federation of Chinese Students and Scholars, INC,"
changing the corporation's name to IFCSS Foundation, Inc.
The IFCSS FOUNDATION INC. remains as a 501(c)(3).

    In its "Articles of Incorporation," the IFCSS
Foundation Inc. stated its purposes as: "The Federation
is organized and shall be operated exclusively for
religious, charitable, scientific, literary and
educational purposes (exempt purposes)... In particular,
and without limiting the foregoing, the Federation shall
(i) disseminate information and educate the public
regarding the democratic movement in China, (ii)
promote freedom, democracy, the rule of law and human
rights in China, and (iii) represent the interests of
Chinese nationals, especially students and scholars,
residing in the United States.

    As a 501(c)(3) corporation, the IFCSS Foundation
must operate for charitable and educational purposes
only. It may NOT engage in any legislative or political
activities. It is exempt from Federal income taxes.
Contributions to this corporation are tax-deductable
to the donor.

    The IFCSS Foundation Inc. has a banking account
under the name of IFCSS Foundation Inc. and a public
accountant. All previous financial transactions are
carried in that account. The IFCSS Foundation Inc.
has an Emplyer ID number: "52-1653-928."

    B. The 501(c)(4):

    In November, 1989, The Federation was already well-
known to the public and it was clear that IFCSS would
be involved in political activities. The extensive
political activities would be in contradiction to its
501(c)(3) tax status. So, on the same day the 501(c)(3)
corporation changed its name to IFCSS Foundation Inc.,
The "Articles of Incorporation of Independent Federation
of Chinese Students and Scholars, Inc." was filed with
the Maryland State Government. This corporation was
incorporated as a 501(c)(4) under the name IFCSS INC.

    In its Articles of Incorporation, the IFCSS Inc.
stated its purposes as: "The Federation is organized and
shall be operated exclusively for the promotion of social
welfare." In Article 4 (iii), it stated that the Federation
shall "engage in activities in support of legislation and
regulations which protect and promote the interests of
Chinese nationals residing in the United States and which
promote the democratic movement in China."

    As a 501(c)(4) corporation, IFCSS Inc. must operate
for "social welfare" purposes which may include legislative
and political activities. It is also exempt from Federal
income taxes, but donations to it are NOT tax-deductable
to the donor. It has a separate banking account (under the
name of IFCSS Inc.) as required by the law and has a
separate Federal Employer ID number: "52-1676-389."

    SUMMARY:  IFCSS is composed of two corporations which
were incorporated under two different names, having
different purposes, legal status and banking accounts.
The IFCSS Foundation Inc, has been a 501(c)(3) corporation
which cannot engage in legal and political activities;
while the IFCSS Inc. is a 501(c)(4) corporation which
may engage in activities in supporting legislations and
regulations which protect and promote the interests of
Chinese nationals in the United States.

2. QUESTIONS ON FINANCIAL MANAGEMENT

    When the two corporations (IFCSS Foundation Inc. and
IFCSS Inc.) were incorporated, IFCSS lawyers cautioned,
which is kept in the Corporate Records of IFCSS Inc.,
against the mis-management of the two different accounts.

    The lawyers advised that it is very important:

    A. All records of the two corporations are kept
separate. (Which has been followed.)

    B. Any money raised by the IFCSS Foundation Inc.
shall not be used by the IFCSS Inc. (If the Foundation's
money is used to support the activities of the IFCSS Inc.,
the Foundation may lose its tax exempt status. (Followed.)

    C. The Corporations must maintain separate bank
accounts and MUST KEEP TRACK OF HOW MONEY, WHICH IS
COLLECTED, IS SPENT. (Followed).

    D. The Corporations should hire a public accountant.
(Followed).

3. THE MANAGEMENT OF DONATIONS

    The IFCSS Inc. has an account established exclusively
for lobby purposes. The account was separated from the
IFCSS Foundation Inc. It has been used by previous terms
to support lobby activities. Therefore, assigning the
account for lobbying the protection bill is not only
legal but also legitimate.

    The IFCSS Council Resolution 4004 provided that the
lobby account should be managed by a managing board.
This measure would help ensure the proper use of the
donations and proper management of the account. Preventing
mis-management of the account and mis-use of the donations
is not only for the interests of donors but also
required by the law.

     IFCSS shall not be held responsible for donations
which are sent to accounts which do not accept the
supervision of IFCSS.

Sincerely

Geng Xiao (Signed)
President of IFCSS
July 26, 1992

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         IFCSS Headquarters Office    Signature
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