Earlier today we published some important financial information on the Public Documents section of our website. As part of Burning Man’s transition to a nonprofit, we are sharing our 501(c)(3) financial and operational information as it becomes available. The 2013 Form 990 is the first step in this process.
Public benefit organizations file a Form 990 each year with the IRS. It is, essentially, the nonprofit’s tax return. The Form 990 has information about the organization’s mission, programs and finances. Burning Man’s 2013 Form 990 includes detailed information about the transition of Black Rock City, LLC from an independent entity to a subsidiary of the nonprofit, as well as financial, salary and programming information.
A Form 990 can be overwhelming for those that have never read one before. So, we’ve created an FAQ (below) to help everyone understand the information included in the Form 990 and what it means about Burning Man’s programs and activities.
We’ve also added information to the FAQ that isn’t included in the Form 990 to give a more complete picture of Burning Man’s finances. There are questions that come up from time to time, for example, around Burning Man’s transition to a nonprofit, relationship to regional events, intellectual property, and the role of Decommodification, LLC. We are taking this opportunity to answer some of the those questions along with the release of the 2013 Form 990.
We’re looking forward to continuing this proactive effort to provide more information about our nonprofit activities. Stay tuned to the Jackrabbit Speaks and our new website, Burningman.org, for more information in the future. [If you have any questions that aren’t answered below, pop them in the comments and we’ll do our best to answer the ones we can.]
2013 Finances and Form 990 FAQ
- Transition / Burning Man Project vs. Black Rock City, LLC
- The Form 990
- Burning Man Project Operations
Transition / Burning Man Project vs. Black Rock City, LLC
Q. What is the difference between Black Rock City, LLC and Burning Man Project?
A. Burning Man Project (“BMP”) is the legal name of the nonprofit umbrella organization for all of Burning Man’s programs and activities, including Black Rock City, LLC (which runs the annual event in Nevada) and the Black Rock Arts Foundation (now Burning Man Arts). We operate as one organization and for simplicity’s sake, we just call the whole thing “Burning Man”.
Q. Why did Burning Man create the Burning Man Project nonprofit?
A. Burning Man Project is the 501(c)(3) not-for-profit public benefit corporation working to extend Burning Man culture in the world. Creating a nonprofit allowed us to formally commit Burning Man to a nonprofit mission — one that first and foremost serves the public good. Nonprofits require a high level of transparency and accountability to the community, and make it possible to receive both financial and in-kind donations.
In the past, the LLC raised nearly all of its money from ticket sales to the annual event in Nevada. But that alone cannot support the flourishing global expansion of Burning Man culture. Every day at the Burning Man office we’re approached with new ideas, projects and partnerships in the ever-growing community of Burners worldwide. We want to seed and support the dreams of inspired Burners year-round, but this endeavor brings with it new challenges and and new costs. The nonprofit structure allows us to accept charitable contributions from the community to help support this important work.
Q. What’s the relationship between the event and the nonprofit?
A. While the entities remain legally separate, culturally we are one. The event can be thought of as the largest and most important ‘program’ of the Burning Man nonprofit. It’s where it all began, and it will continue to be the heart of what we do and who we are. Whether we’re working on producing Black Rock City, nurturing the Regional Network’s growth around the globe, creating educational opportunities for community leaders or providing grants to civic art projects, we are all part of the same organization, housed in the same office, with the same mission — to enact positive and lasting cultural change.
Q. If the LLC still exists, isn’t Burning Man still a “for profit” company?
A. Not exactly. Black Rock City, LLC is a “single member” LLC of Burning Man Project, meaning Burning Man Project is the sole owner of BRC, LLC. For legal and liability reasons, this is the best way for the organization to ensure that the annual event in the Black Rock Desert can and will continue to to operate in the same spirit it has until now.
However, as a single member LLC owned by a nonprofit organization, any and all profits leftover after the operating expenses of the LLC are accounted for must flow directly into the umbrella nonprofit organization. The profits do not go to any individual owners or interest groups — they must be reinvested in the programs of the nonprofit to further its mission. In other words, any funds left over after producing the annual event in Nevada must be used for having a wider positive cultural impact beyond Black Rock City. (For those non-profit nerds out there, this Non-Profit LLC relationship is also known as a Model L fiscal Sponsorship.)
Q. Are tickets to the event tax deductible now that Burning Man is a nonprofit?
A. No. Tickets to the event in Nevada are not tax deductible because the buyer receives something in return for that purchase that is equal in value to the amount paid. Only contributions that don’t come with a direct value exchange are tax deductible.
Q. What is the relationship between the nonprofit and BRAF, BWB and Black Rock Solar?
A. Black Rock Arts Foundation became a subsidiary of Burning Man Project in July, 2014, at which point BRAF’s programs were transferred to Burning Man Project. BRAF’s Board of Directors voted for the transaction to happen. Operationally, BRAF and Black Rock City’s Art Department were combined to create Burning Man Arts, which provides grants and other services to artists and art projects both on and off the playa.
For the last couple of years, Burning Man Project has served as the fiscal sponsor of Burners Without Borders, which is a California Public Benefit Corporation (without its own 501(c)(3) status). BWB’s worldwide grassroots activities and mission are (and will continue to be) a priority for Burning Man as we work to spread Burning Man culture around the globe. BMP and BWB are currently in discussions about the best way to structure this relationship in the future. (Note: Because Burning Man Project has been the fiscal sponsor of Burners Without Borders, the Form 990 is a consolidated tax return, meaning that BWB’s revenue and expenses are included in Burning Man Project’s.)
Black Rock Solar was born out of the Burning Man event, but continues to be a separate nonprofit with a mission to provide free or low-cost solar power and solar installation training to low-income communities in Nevada and California. Black Rock Solar’s office is in Burning Man’s San Francisco headquarters but it is not a subsidiary and there are no plans for it to become one.
Q. What is the relationship between the nonprofit and the other Burning Man events around the world, or the ‘Regional Network’?
A. While official regional events operate with a large degree of autonomy, we’ve been building and supporting the network since 1997. The Regionals Department is now officially a program of the nonprofit Burning Man Project and its mission is to directly support the Regional Network by providing opportunities for cross-pollination and collaboration amongst Regional Contacts, regional event production teams, and Burning Man community leaders around the world. By tapping into our decades of experience, we’re able to provide useful tools for engaging in arts and civics at the local level.
The intention of this work has never been about earning money, but in business terms, this program operates at a financial loss. We do not currently (nor have we historically) charged regional events or regional groups for any of the promotion, leadership development, training or production tools that we provide. We ask, as part of our official event process, that official events that end up with a profit make a donation to support Burning Man Project or one of our related nonprofits. Some official events have made donations, but most choose to direct profits back to local community initiatives.
Burning Man regularly covers the costs of travel and salary for members of our staff to provide direct support to a regional event’s production team. We also heavily subsidize the cost of our Global Leadership Conference each Spring in the San Francisco Bay Area and the European Leadership Summit (now in its second year). These leadership gatherings provide a platform for our global leaders to share best practices and experiences, receive training to support them in their roles, and work together towards a shared vision for our community’s future.
Q. What’s the difference between the Burning Man Project Board and the ‘Board’ of Black Rock City, LLC?
A. Prior to the creation of the nonprofit, the Black Rock City, LLC Board was the group directly responsible for managing the operations of the event. A version of that leadership team continues to manage Black Rock City operations – the ‘Event Board’ is made up of key staff members including the six original founders, the Event Operations Director, the head of finance and the head of the legal department.
The Burning Man Project Board of Directors is a separate body that serves Burning Man’s mission to extend Burning Man culture in the world. The 19-member board of the nonprofit Burning Man Project is not involved in the daily operations of Black Rock City, LLC. The role of the nonprofit Board is to provide strategic oversight and leadership — ultimately, the Board is charged with providing strategic and financial oversight to the organization, and upholding the Ten Principles.
The Form 990
Q. What is the Form 990?
A. The Form 990 is an IRS tax form that provides the public with financial and programming information about a nonprofit organization. Essentially, it is the organization’s annual tax return. It is also used by government agencies to prevent organizations from abusing their tax-exempt status.
Q. What does it mean for Burning Man?
A. The 2013 Form 990 for Burning Man Project represents a snapshot of the nonprofit at the end of 2013. It includes information about the transaction that made Black Rock City, LLC a subsidiary of the Project, compensation of staff, fundraising efforts, and programming activities. A 990 is produced at the end of the year for the year prior. Each year we will share these documents in the Public Documents section of our website. This is one of the primary ways we plan to provide financial information about our organization and to be transparent about our operations.
Q. So what does the 2013 Form 990 say about the state of the nonprofit?
A. In brief, the 2013 Form 990 shows Burning Man Project’s program accomplishments are solid for a three year old nonprofit. Even though new nonprofits are not subject to the IRS’s “public support test” for the first five years, Burning Man Project qualifies as a publicly supported organization in its third year since the organization has a public support percentage above 33.33%.
The Form 990 also shows the significant transaction that occurred between the nonprofit and BRC, LLC. Burning Man Project’s net assets are substantially higher in 2013 ($7.3 million) than 2012 ($332,000) due in large part to the acquisition of Black Rock City, LLC (see below for more information on “the transaction”). Total expenses also increased substantially, since the organization’s primary objective in 2013 was to build capacity in the form of nonprofit infrastructure. While still in its infancy, the nonprofit was focused on developing the systems and staffing necessary in the short term to achieve its broad goals in the long term.
Note: The Form 990 for 2013 does not include details about BRC, LLC’s operations since that entity did not become a legal subsidiary of Burning Man Project until the end of 2013. The Form 990 for 2014 will include more information about BRC, LLC’s finances.
Q. When did the transaction between entities take place?
A. The Burning Man Project Board of Directors voted to acquire Black Rock City, LLC on December 27, 2013. The transaction became effective January 1, 2014. The transition (the actual transfer of assets and employees) took place over the course of 2014 and continues into 2015.
Q. How did the transaction happen?
A. The Internal Revenue Service has guidelines for this type of transaction. The Burning Man Project Board determined they wanted to acquire Black Rock City, LLC as a subsidiary (note: in the 990, the acquisition of BRC, LLC is often referred to as an ‘investment’). The Board voted unanimously for the transaction to happen.
The six founders of BRC, LLC (Crimson Rose, Will Roger, Michael Mikel, Marian Goodell, Harley K. DuBois and Larry Harvey) each owned an equal one-sixth interest in the company so they were considered ‘interested parties’ and did not participate in the vote. The Board met several times without the six founders present, and with independent legal counsel who did not represent any of the founders or BRC, LLC. The transaction was made with the advice of two qualified nonprofit lawyers from different firms. The IRS requires this type of transition to be characterized as a sale, and that taxes are paid — the process followed state and federals laws for such a transaction.
Q. What exactly was transacted?
A. Black Rock City, LLC produces the annual event in Nevada and the acquisition included all assets and liabilities of BRC, LLC, as of December 31, 2013. As part of the transaction, BRC, LLC amended its governance documents to irrevocably dedicate its assets to nonprofit purposes and to become a wholly owned subsidiary of Burning Man Project.
Q. What was the value of the transaction? Was Burning Man “sold”?
A. Prior to the transaction, the Burning Man Project Board of Directors commissioned two independent professional appraisals of Black Rock City, LLC to determine the value of BRC, LLC. The company — as of December 31, 2013 — was valued at $7,390,000.
Because the IRS considers this type of transaction to be a “sale”, the owners of BRC, LLC (the six founders) are referred to as ‘sellers’ in the Form 990. However, instead of each founder being paid for the value of their one-sixth share of Burning Man, LLC (valued at $1,231,667 each), they elected to donate all but a small fraction of the value of their shares to the Burning Man Project.
In return, Burning Man Project agreed to pay a deeply discounted price of $46,000 to each of the six LLC members for their one-sixth share of BRC (3.9% of what those shares were actually worth). This made the total purchase price $276,000. The Burning Man Project then signed a promissory note to pay each of the founders $46,000.
Q. What about the remaining $7.1 million worth of assets?
A. The remaining $7.1 million worth of assets is the value of the shares that the founders elected to donate to the nonprofit. Each founder owned shares that were worth $1,231,667. After each founder agreed to be paid $46,000 for their stake, a remaining $1,185,667 of value was gifted by each of them. The combined value of these gifts ($1,185,667 x6) is $7,114,000.
Q. Are the founders still being paid by Burning Man?
A. Five of the prior owners of BRC, LLC now receive a salary based on their responsibilities and level of involvement with the Burning Man Project, and one prior owner remains employed by Black Rock City, LLC.
The Burning Man Project agreed to employ Crimson Rose, Michael Mikel, Marian Goodell, Harley K. DuBois and Larry Harvey beginning January 1, 2014. Two surveys of compensation for similar positions in similarly situated Northern California arts nonprofits were conducted, which provided a guide for determining compensation for each of them. One founder (Will Roger) remained an employee of BRC (since the work he was doing at that time was mostly related to the annual event in Nevada) at a level of compensation determined using the same method
Additional salary information will be included in the Form 990 for 2014, since that is the year in which five of the founders became employees of the nonprofit Burning Man Project (see below for more info).
Q. The Form 990 says BMP received $7.8 million in “contributions” in 2013. This is up from $600,000 the year before. Can you explain this?
A. The $7.8 million in contributions is primarily from the six founders who donated the value of BRC, LLC to BMP (see above). The remaining $700,000 in donations came from a variety of sources including contributions from board members, grants from foundations and donations made by individuals in the community.
Q. What about Burning Man’s trademarks?
A. The Burning Man organization has sought trademark protection for a number of our culture’s most recognizable words and symbols (including the logo of ‘the Man’ and the phrase ‘Burning Man’) in order to limit their use by outside businesses and preserve our culture of decommodification.
We protect these trademarks because we are not interested in becoming a brand used to sell goods or services or to promote outside organizations or events. We work to actively prevent the use of our trademarks in commercial enterprises to defend against the commodification of our event and our culture. For more information on why and how we manage intellectual property, see the Trademarks and Copyrights section of our website.
Decommodification, LLC (a separate entity) currently holds temporary ownership of Burning Man’s trademarks. Decommodification, LLC does not license these trademarks except to Burning Man Project, for which the Project pays an annual fee not to exceed $75,000. This fee is based on the valuation of the trademarks by the independent appraisers.
Q. Who owns Decommodification, LLC and why does it exist?
A. Decommodification, LLC is a holding company that was set up to temporarily own Burning Man’s trademarks while the organization transitions from an LLC to a
nonprofit. The six founders of Burning Man (Crimson Rose, Will Roger, Michael Mikel, Marian Goodell, Harley K. DuBois and Larry Harvey) are equal ⅙ owners of Decommodification, LLC. In 2018, the trademarks are scheduled to transfer to the Burning Man Project to be held in perpetuity by the nonprofit for the benefit of Burning Man culture.
The reason for not transferring the marks to the Burning Man Project sooner is it is still a fledgling nonprofit. If a nonprofit ever has to dissolve for any reason, technically the state in which the nonprofit is registered has the authority to transfer all of the organization’s assets to a different nonprofit. In other words, until the Project firmly establishes itself in the world, there is a risk that its assets could be transferred to some other nonprofit by the State of California. If that were to happen, people outside the Burning Man community could gain control over the marks, which could lead to unchecked commercial use. This is something we actively work to prevent, so Decommodification, LLC is managing the trademarks until 2018, giving the Project time to establish itself as a nonprofit with longevity.
Burning Man Project Operations
Q. What do the program revenues and expenses tell us about Burning Man Project’s operations in 2013?
A. Program revenue doubled from 2012 ($51,000) to 2013 ($108,000) due to an increase in income from consulting, educational, and granting activities. Burning Man Project received funds to support civic engagement initiatives like Y.E.S. (Youth Educational Spacecraft) and art consulting services to Downtown Project in Las Vegas.
Programming, operations and “management” expenses (line 11a) included: Big Art for Small Towns; educational workshops and engagements in the San Francisco Bay Area; BWB’s fiscal sponsorship (including work with Jakmel Ekspresyon in Haiti and in response to Hurricane Sandy in New Jersey). The Project also engaged independent contractors in the areas of legal, finance and business operations in an effort to grow quickly and efficiently, and to prepare for the transition of BRC, LLC.
For more detailed information, check out the Project’s Afterburn report from 2013.
Q. What organizations did Burning Man Project make grants to in 2013?
A. The following:
● Dana Albany Y.E.S. project
● Burners without Borders, Jakmel Ekspresyon, Haiti
● Black Rock Arts Foundation, Big Art for Small Towns
Q. What does the 990 say about the Burning Man Project Donation Ticket Program?
A. In 2013, 300 tickets were sold for $650+ including a $250+ donation to the nonprofit. The amount BMP paid BRC for the tickets consigned was equal to the amount BRC donated to BMP ($120,000). The total ticket fees from this ticket sale was $201,866, meaning the nonprofit netted just over $80,000 through the program. This program was repeated in 2014 (the details of which will be included in the 2014 Form 990) but will not be repeated in 2015.
Q. What salary information is included in BMP’s 2013 990?
A. The 2013 990 includes current officers, directors, current ‘key employees’ and trustees of Burning Man Project as of 12/31/13. In the year 2013 there were no employees of Burning Man Project that met this threshold. Former directors and trustees who received over $10,000 of reportable compensation in the capacity as a former director or trustee are also listed. Additional salary information will be included in the 2014 990 based on the Key Employee Test (or the latest version of the test if the IRS amends it).
Q. What is the ‘Key Employee Test’?
A. For the purpose of the Form 990, the IRS defines a “key employee” as an employee of the organization (other than an officer, director, or trustee) who meets all three of the following criteria:
- Receives reportable compensation from the organization in excess of $150,000 for the calendar year.
- At any time during the calendar year:
- Has responsibilities, powers, or influence over the organization as a whole that is similar to those of officers, directors, or trustees;
- Manages a discrete segment or activity of the organization that represents 10% or more of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole; or
- Has or shares authority to control or determine 10% or more of the organization’s capital expenditures, operating budget, or compensation for employees.
- Is one of the 20 employees other than officers, directors, and trustees with the highest reportable compensation from the organization for the year.
Q. Why didn’t you post the 2012 990 form before now?
A. As is legally required, the Form 990 was always available upon request, and was requested by a few individuals for review upon its submission to the government in November 2013. The non-profit was just getting formed, and there wasn’t as much to report in the 2012 Form 990. But the scope of information is broader and more important now. We plan to do this every year from now on.