
A Bank for Student Hackers - zachlatta
https://medium.com/hackclub/a-bank-for-student-hackers-e5d894ea5375
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gbear605
I'm not positive, but it seems like a natural direction to look toward would
be FIRST robotics teams. New teams face a lot of challenges, one of which is
getting to a place where they can get donations and have access to their
funds.

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jpjamipark
As a FIRST alum, this would've been so helpful when looking for
sponsors/donations. When you route your money through a school, it becomes a
total pain to get access to it. A parent had to call/email the school for
months just to get access to the money we needed to buy parts.

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driverdan
This is a great idea.

Have you discussed this with a lawyer? It seems like this would qualify you as
a money transmitter which has very strict requirements in many states. There
are restrictions on the word "bank" and how that term can be used too.

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zachlatta
Fortunately we're not acting as a money transmitter, but rather as a fiscal
sponsor - see
[https://en.wikipedia.org/wiki/Fiscal_sponsorship](https://en.wikipedia.org/wiki/Fiscal_sponsorship).

A very common practice in the non-profit world, but very much not something
that is accessible to students. Most fiscal sponsors out there are very
bureaucratic and not set up to handle short-term engagements like hackathons.

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Sangermaine
You've had an attorney with experience in this area confirm and help establish
(e.g., by drafting the sponsorship contract) this arrangement?

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zachlatta
Yup, we're working with a non-profit law firm here.

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infinitebattery
This is so great. As someone who used to run a Hack Club, it's so exciting to
see this (would have solved a lot of problems for me back in high school).

Out of curiosity, are there ever plans to expand this beyond high school?

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zachlatta
Potentially. We want to start by focusing on high school events, eventually
start to provide more general financial services to clubs, and later may
consider doing sponsorship for collegiate events.

So cool to see an alum on HN :-).

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allenz
> An underlying bank account with 501(c)(3) status, so donations to events are
> tax deductible

I'm not sure why the bank's tax status is relevant, since the bank doesn't own
the funds. Also, most credit unions are nonprofit.

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zachlatta
Important thing here is that events working with us can offer tax deductions
to donors through our 501(c)(3) tax status.

Most sponsors for high school events want to see some sort of non-profit
status when giving and it takes over a year and thousands of dollars to create
a new entity in the US. With Hack Club Bank, they can get set up under our
parent entity in under a week.

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ganoushoreilly
"takes over a year and thousands of dollars to create a new entity in the US"
This is a very misleading statement. 4 years ago I setup a 501(c)3 non profit
and was able to get state and federal recognition, as well as all licensing
necessary handled in a 4 month period from start to finish for under $400.
What it does take is persistence and patience.

~~~
zachlatta
Sorry, should definitely clarify better - it comes down to whether you're
filing a 1023 or a 1023EZ. Many events need to file 1023 due to expected
annual budget being over $50K.

I'm happy you were able to get your status so quickly. It took us about a
year. The filing fee for the 1023 alone is $600.

The IRS has an overview of the expected timelines at
[https://www.irs.gov/charities-non-profits/charitable-
organiz...](https://www.irs.gov/charities-non-profits/charitable-
organizations/wheres-my-application), though they often get backlogged by
months. The filing instructions for the 1023 are also a fun read:
[https://www.irs.gov/pub/irs-pdf/i1023.pdf](https://www.irs.gov/pub/irs-
pdf/i1023.pdf)

~~~
ganoushoreilly
If you are running events in the 50k range you have capital to manage the
process. I still fail to see the argument you are making, few groups as you
mention here are running 50k events.

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villnn
The funds are best disbursed through a non-profit because most high school
students do not know about legal and accounting procedures. Say an after-
school club raises 20k intended for the annual budget. Sponsors which might be
individuals but more than likely are companies will not write a check to any
student but rather write a check to the school. Schools alone have many
bureaucratic hurdles that make managing club funds inefficient. Therefore,
although Clubs might have in paper 20k or say even 50k that money is being
held by the school or another organization whose priority is not acting as the
middleman, therefore, causing delays and all sorts of problems. Tackling a
very cumbersome challenge, congrats Hack Club!

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valenciarose
Are you actually a bank? That’s a highly restricted term. To the point that
non-banking subsidiaries of banks (like brokerages) use the word Banc to avoid
the restrictions.

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TomMarius
This problem/market is very interesting and strange to me. In my country,
you're able to open a bank account in 15 minutes, the only requirement is to
have a parent present if you're under 15, of course you have to present your
identity, and you have to deposit just 200 to 1000 CZK (7.5 to 50 dollars, or
5 to ±30 beers). No credit checks, no solvency requirements, no debt-free only
policy, nothing like that, you literally walk out with a working bank account
(and a debit card will arrive by mail shortly after) that is _completely free_
for everyone and for all use cases that an average person has.

Bank accounts are treated as marketing for other financial services so you
will even get free money if you open it in a bank that currently has a
promotion (usually around 200 to 500 CZK - 7.5 to 20 dollars, or 5 to 12
beers).

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hobbyjogger
Plenty of high school kids have bank accounts here. That's not the issue.

The problem is that a personal bank account doesn't qualify as a non-profit
under U.S. tax laws. So donors can't write off the donation and the kid would
be assessed income taxes on the donation.

~~~
TomMarius
Huh, that makes it even stranger. How do you e.g. share flats? Buy tickets for
a concert as a group? Buy a plane ticket as a group? This is basic stuff...

~~~
hobbyjogger
None of those are donations, nor are they anywhere near being tax deductible.

Again, you're focused on a totally different issue. There's nothing wrong with
splitting costs or reimbursing a friend who bought you something.

Splitting rent or cab fare, etc. is fine, but that certainly doesn't mean a
H.S. kid can receive $50k in "donations" in his/her personal bank account
without worrying about the tax implications. That's the issue the OP is trying
to address.

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TomMarius
I see now, thanks.

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dsl
Just FYI, You can't call yourself a bank. It is a restricted term in most US
states and the UK.

[https://en.wikipedia.org/wiki/Banq_(term)](https://en.wikipedia.org/wiki/Banq_\(term\))

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bhargavy
This is the new standard for student run hackathons. Now, the students get
both control and security for their money.

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antcas
This is a great idea and solves a huge headache for hackathon organizers.
Dealing with taxes and a multiple university accounts was a huge hassle at
Bitcamp. We eventually became a non-profit which took over a year to complete.
It would have been great to be able to use a service like this instead.
Though, given the size of Bitcamp compared to most hackathons, it probably
still would make sense to go through the extra effort to be our own non-profit
entity.

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JSneak
The fact that you guys show a dashboard is amazing. Ive had too many bad
experiences with long response times after asking how much money we had/trying
to spend.

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finolex1
I hope you would consider expanding this to cover all student organizations -
it's not just hack clubs that hold events or seek donations.

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duxup
This is a great idea.

Having said that, school groups do spend money, bands, clubs and etc.... how
are the others doing it successfully?

"The only person who had access to the bank account was the principal, but
nobody knew where he was. 24 hours later, Jake and I were on the phone with
the vice principal who was also left in the dark. A week later, the principal
showed up in Tokyo and the money was still completely restricted. They missed
the deadline for purchasing the flights and the trip was cancelled. What the
hell happened?"

What did happen? They never really explain that.

~~~
zachlatta
Most store money with their school, but rarely have budgets exceeding $1K.
Clubs with larger budgets like band typically have much heavier faculty
involvement, which is often not the case with Hack Clubs.

For Kapaa High School, the money is still sitting today in a restricted bank
account only the principal has access to - the trip never happened and the
donors are frustrated, to say the least.

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ethanhoroschak
Amazing! Excited to see how this turns out!

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soared
> To do it yourself, you must incorporate and seek non-profit status which can
> take over a year and thousands of dollars in the United States

Joint business bank account at any major bank solves this. File for an llc in
colorado (~$65) and open the account. Tax free, fee-free, and you can get
multiple debit cards.

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zachlatta
Keep in mind most of our students are minors and many are in situations where
creating new entities that increase reported personal income would put them in
a compromising position - ex. push their family over the income threshold for
a welfare program and disqualify them.

Sponsors for high school events also typically look for 501(c)(3) status
before giving to events that benefit their community. I'm sure an LLC is a
great solution for many, but there's a reason high schoolers don't already do
this for hackathons.

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akhilcacharya
How are you handling debit cards?

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XiZhao
Awesome work, congrats Hack Club!

