Time Dollars and Stuff:

Time Dollars and Stuff:

How to Sell Things for Time Dollars Without Jeopardizing its Tax-exempt Status

It takes a little while to get used to the total equity of the Time Banking world. It seems a little whacky at first that everyone’s time is valued equally no matter what the task, but then it makes total sense that in the caring world we are all equal. But what about things? How do we price things in the Time Banking world?

Charging one Time Dollar for anything no matter what the market price makes no sense, but if you use a simple formula like making one Time Dollar equal to $10 and price things accordingly, you would be directly violating the principles that make Time Dollars tax-exempt. It is important to keep Time Dollars tax exempt because if they were not, each person would have to make a fair and accurate assessment of the value of the goods and services they receive each year from Time Dollars and report that as income to the Internal Revenue Service. It would turn into a bookkeeping nightmare for all of us.

The tax-exempt status of Time Dollars is founded on three principles:
1. It makes little economic sense that everyone’s time is valued equally in the TimeBanking world.
2. Time Dollars are not “legal tender”. You can’t sue a person or a Time Bank if someone refuses to take your Time Dollars for goods or services that they are offering.
3. There is a general chartable intent behind Time Dollars. They exist to help people live more wholesome lives of meaning and connection. They are not intended to provide luxury goods.

It is relatively easy to stay within these guidelines when Time Dollars are used to buy services that are all provided on a voluntary basis and priced at one Time Dollar per hour, no matter what the task. But, Time Banks around the world have come up with some ingenious solutions to the problem of how to provide access to goods for Time Dollars without inadvertently giving them a market value and thus making them taxable income.

Here are some examples:
• Some Time Banking programs have secured monetary discounts of 10, 15 or 25% from the private sector like the ones that organizations like AAA or AARP offer their members.
• Other programs give Time Dollars a monetary value with arrangements that let you redeem your Time Dollars for awards, the same way you do with frequent flyer miles. Sometimes, the Time Dollars are actually “cashed in” or subtracted from your account
• In other programs, if you earn a preset number of Time Dollars, you are entitled to a choice of awards as a form of recognition – but no credits are actually redeemed or subtracted.
• One Time Bank has developed a catalog “Credit Shop” that enables members to exchange 75 credits or 150 credits for different categories of health-related devices (blood pressure, pulse meters, bath spa machines), taxi vouchers, social events for oneself and a companion, and home delivered meals for other elderly persons.
• In the United Kingdom, where any kind of purchase with Time Credits would breach Inland Revenue rules, Time Bank programs simply give awards based on rules adopted by each program. One university has agreed to credit Time Dollars toward tuition payments.
• Another approach to incentives builds upon reinforcing giving to others. One suggestion that has generated enthusiasm among HMO members: use of their credits to secure medical coverage for women in a battered women’s shelter. African-American churches found another way to reinforce altruism. Members could contribute their Time Dollars to a church fund set up especially for members in need. Their slogan: with one hour, you serve twice – first the person whom you help, the second, the church and those it needs to help.

We are sure there are many other schemes for using Time Dollars to safely sell goods and you may choose to try something new. We’ve extracted some of the principles behind the examples above to guide your thinking.

1. Charge Time Dollars for the time it takes to create something and market dollars for the raw materials.
2. Create broad reward categories like they do in frequent flier programs where items in each category vary so much in price that one can not calculate a precise value for a Time Dollar.
3. Give discounts from market price based on the size of a member’s Time Dollar balance and overall Time Dollar activity in the previous year.

Pricing things based on the time it took to create them
This is the most straightforward and consistent principle for pricing things in Time Dollars. Examples include:
• Pricing arts and crafts items by the time it took to make them.
• Pricing refurbished donated computers based on the time it took to fixed them, regardless of the speed and memory capacity of the computer.
• Pricing vegetables by estimating the time it took to tend them and bring them to market.

Many people find this formula to be much more easier to use if they can sell items using two currencies at once. Thus, you charge Time Dollars for the time it takes to make something and standard dollars for the cost of the raw materials. For example, a knitted scarf might sell for ten Time Dollars and $20 for the cost of the yarn. The technical term for this is a “mixed currency transaction.” Mixed Currency pricing is generally regarded as the simplest, cleanest method of pricing things in Time Dollars.

Using broad reward categories to price things
A TimeBank could price things based on broad equivalencies between Time Dollars and US dollar prices. For example:

US$ Value Time Dollars$ Price Value Range in US$
0-20 1 1.00-20
21-200 10 2.10- 20
201-1000 100 2.10 -10

You can quickly see that the breadth of the pricing categories makes little economic sense. One could hardly run an economy with just three prices. This is similar to principle one in the IRS guidelines that Time Dollars make little economic sense because we charge the same rate for everyone’s time without regard for the value of their time in the market economy.

In this pricing scheme, it’s important to remember that you can only set a few Time Dollar prices for things. If you put a price of 8 Time Dollars on an item, it would narrow the value range into economic sensibility and jeopardize the Time Dollar tax exempt status. The more Time Dollars pricing categories and the smaller the range in value, the more likely the IRS will see real economic value in Time Dollars pricing of things. We have no idea where the IRS would draw the line so we recommend that if you use the broad reward category method of pricing that you use just three categories of Time Dollars pricing – small, medium and large.

You may have noticed that we are using the term broad reward categories. That is because the case for tax-exemption is made much stronger when Time Dollars are used to reward charitable behavior. If one is clearly rewarding civic participation as in the case of Time Dollar Youth Court and Time Dollar Cross-Age Peer tutoring programs (see www.timebanks.org/models.htm) , then charging for things based on broad reward categories is primarily about encouraging volunteerism. The more clearly you state that something is a reward for work that that benefits the general welfare of society, the more clearly the receipt of that item is tax-exempt.

Offering discounts based on civic participation
Many businesses use targeted discounts and loyalty programs to bring in customers that they wouldn’t normally get. You may have noticed:
• Early bird specials at restaurants and movies
• Two-for-one restaurant coupons
• Frequent flier programs that let you fly free, but only when there are lots of extra seats and not during the peak season or “black-out dates.”
• Senior discounts
• Loyalty cards that give you something free or a discount after X visits or Y dollars spent

When a business owner decides how to promote their business, they are always estimating whether the cost of the advertising will be more than the profit brought in by the extra customers. In the technical language of business, one can still make a profit if one covers the marginal cost of servicing the extra customers. Time Bankers can use this knowledge to get discounts for their members.

Offering discounts to Time Bank members can bring customers in the door that they wouldn’t normally see and keep them coming in as well. Businesses owners know it costs lots more money to find new customers through advertising than it is to bring back customers that have already experienced their service. So don’t be shy in asking for discounts for your members from local businesses in exchange from promoting their services in newsletters and on your community page on the web site.

Business with high fixed costs and low variable costs should be your first targets. Restaurants and movie theaters have certain fixed costs involved in running their businesses that would be easier to cover if they could get more people in the door. Once the movie theater owner commits to a showing a movie, there isn’t a great deal of extra cost to having 50 extra people see the movie instead of the 25 that would normally show up at 4 PM in the afternoon. It can be more economical to fill a theater with discounted tickets than to play to an empty house. This is especially true if you bring in people that wouldn’t normally come at a busy time or if you can transfer people from the peak times when the seats fill up and people are turned away at the door.

Summary
We will need creativity to keep expanding the examples. Concern over incentives has primarily been to enable members to spend their credits for something they need. But newer thinking now is focusing on incentives for organizations to invest in Time Banking in ways that either advance their mission or enable them to address costs such as printing or publicity or long distance phone calls or even, staff vacations. As the movement gains momentum, we are likely to see more organizational incentives emerge. But the bottom line will also be: avoid any conversion that equates Time Credits with the market value of the labor.

Author Unknown

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Time Dollars and Stuff:
TonyB Joined: 17 Sep 2007 Posts: 91 Location/Time Bank: N.E. Ohio	Dated: Thu Aug 13, 2009 12:23 pm Subject: Time Dollars and Stuff:
	Time Dollars and Stuff: How to Sell Things for Time Dollars Without Jeopardizing its Tax-exempt Status It takes a little while to get used to the total equity of the Time Banking world. It seems a little whacky at first that everyone’s time is valued equally no matter what the task, but then it makes total sense that in the caring world we are all equal. But what about things? How do we price things in the Time Banking world? Charging one Time Dollar for anything no matter what the market price makes no sense, but if you use a simple formula like making one Time Dollar equal to $10 and price things accordingly, you would be directly violating the principles that make Time Dollars tax-exempt. It is important to keep Time Dollars tax exempt because if they were not, each person would have to make a fair and accurate assessment of the value of the goods and services they receive each year from Time Dollars and report that as income to the Internal Revenue Service. It would turn into a bookkeeping nightmare for all of us. The tax-exempt status of Time Dollars is founded on three principles: 1. It makes little economic sense that everyone’s time is valued equally in the TimeBanking world. 2. Time Dollars are not “legal tender”. You can’t sue a person or a Time Bank if someone refuses to take your Time Dollars for goods or services that they are offering. 3. There is a general chartable intent behind Time Dollars. They exist to help people live more wholesome lives of meaning and connection. They are not intended to provide luxury goods. It is relatively easy to stay within these guidelines when Time Dollars are used to buy services that are all provided on a voluntary basis and priced at one Time Dollar per hour, no matter what the task. But, Time Banks around the world have come up with some ingenious solutions to the problem of how to provide access to goods for Time Dollars without inadvertently giving them a market value and thus making them taxable income. Here are some examples: • Some Time Banking programs have secured monetary discounts of 10, 15 or 25% from the private sector like the ones that organizations like AAA or AARP offer their members. • Other programs give Time Dollars a monetary value with arrangements that let you redeem your Time Dollars for awards, the same way you do with frequent flyer miles. Sometimes, the Time Dollars are actually “cashed in” or subtracted from your account • In other programs, if you earn a preset number of Time Dollars, you are entitled to a choice of awards as a form of recognition – but no credits are actually redeemed or subtracted. • One Time Bank has developed a catalog “Credit Shop” that enables members to exchange 75 credits or 150 credits for different categories of health-related devices (blood pressure, pulse meters, bath spa machines), taxi vouchers, social events for oneself and a companion, and home delivered meals for other elderly persons. • In the United Kingdom, where any kind of purchase with Time Credits would breach Inland Revenue rules, Time Bank programs simply give awards based on rules adopted by each program. One university has agreed to credit Time Dollars toward tuition payments. • Another approach to incentives builds upon reinforcing giving to others. One suggestion that has generated enthusiasm among HMO members: use of their credits to secure medical coverage for women in a battered women’s shelter. African-American churches found another way to reinforce altruism. Members could contribute their Time Dollars to a church fund set up especially for members in need. Their slogan: with one hour, you serve twice – first the person whom you help, the second, the church and those it needs to help. We are sure there are many other schemes for using Time Dollars to safely sell goods and you may choose to try something new. We’ve extracted some of the principles behind the examples above to guide your thinking. 1. Charge Time Dollars for the time it takes to create something and market dollars for the raw materials. 2. Create broad reward categories like they do in frequent flier programs where items in each category vary so much in price that one can not calculate a precise value for a Time Dollar. 3. Give discounts from market price based on the size of a member’s Time Dollar balance and overall Time Dollar activity in the previous year. Pricing things based on the time it took to create them This is the most straightforward and consistent principle for pricing things in Time Dollars. Examples include: • Pricing arts and crafts items by the time it took to make them. • Pricing refurbished donated computers based on the time it took to fixed them, regardless of the speed and memory capacity of the computer. • Pricing vegetables by estimating the time it took to tend them and bring them to market. Many people find this formula to be much more easier to use if they can sell items using two currencies at once. Thus, you charge Time Dollars for the time it takes to make something and standard dollars for the cost of the raw materials. For example, a knitted scarf might sell for ten Time Dollars and $20 for the cost of the yarn. The technical term for this is a “mixed currency transaction.” Mixed Currency pricing is generally regarded as the simplest, cleanest method of pricing things in Time Dollars. Using broad reward categories to price things A TimeBank could price things based on broad equivalencies between Time Dollars and US dollar prices. For example: US$ Value Time Dollars$ Price Value Range in US$ 0-20 1 1.00-20 21-200 10 2.10- 20 201-1000 100 2.10 -10 You can quickly see that the breadth of the pricing categories makes little economic sense. One could hardly run an economy with just three prices. This is similar to principle one in the IRS guidelines that Time Dollars make little economic sense because we charge the same rate for everyone’s time without regard for the value of their time in the market economy. In this pricing scheme, it’s important to remember that you can only set a few Time Dollar prices for things. If you put a price of 8 Time Dollars on an item, it would narrow the value range into economic sensibility and jeopardize the Time Dollar tax exempt status. The more Time Dollars pricing categories and the smaller the range in value, the more likely the IRS will see real economic value in Time Dollars pricing of things. We have no idea where the IRS would draw the line so we recommend that if you use the broad reward category method of pricing that you use just three categories of Time Dollars pricing – small, medium and large. You may have noticed that we are using the term broad reward categories. That is because the case for tax-exemption is made much stronger when Time Dollars are used to reward charitable behavior. If one is clearly rewarding civic participation as in the case of Time Dollar Youth Court and Time Dollar Cross-Age Peer tutoring programs (see www.timebanks.org/models.htm) , then charging for things based on broad reward categories is primarily about encouraging volunteerism. The more clearly you state that something is a reward for work that that benefits the general welfare of society, the more clearly the receipt of that item is tax-exempt. Offering discounts based on civic participation Many businesses use targeted discounts and loyalty programs to bring in customers that they wouldn’t normally get. You may have noticed: • Early bird specials at restaurants and movies • Two-for-one restaurant coupons • Frequent flier programs that let you fly free, but only when there are lots of extra seats and not during the peak season or “black-out dates.” • Senior discounts • Loyalty cards that give you something free or a discount after X visits or Y dollars spent When a business owner decides how to promote their business, they are always estimating whether the cost of the advertising will be more than the profit brought in by the extra customers. In the technical language of business, one can still make a profit if one covers the marginal cost of servicing the extra customers. Time Bankers can use this knowledge to get discounts for their members. Offering discounts to Time Bank members can bring customers in the door that they wouldn’t normally see and keep them coming in as well. Businesses owners know it costs lots more money to find new customers through advertising than it is to bring back customers that have already experienced their service. So don’t be shy in asking for discounts for your members from local businesses in exchange from promoting their services in newsletters and on your community page on the web site. Business with high fixed costs and low variable costs should be your first targets. Restaurants and movie theaters have certain fixed costs involved in running their businesses that would be easier to cover if they could get more people in the door. Once the movie theater owner commits to a showing a movie, there isn’t a great deal of extra cost to having 50 extra people see the movie instead of the 25 that would normally show up at 4 PM in the afternoon. It can be more economical to fill a theater with discounted tickets than to play to an empty house. This is especially true if you bring in people that wouldn’t normally come at a busy time or if you can transfer people from the peak times when the seats fill up and people are turned away at the door. Summary We will need creativity to keep expanding the examples. Concern over incentives has primarily been to enable members to spend their credits for something they need. But newer thinking now is focusing on incentives for organizations to invest in Time Banking in ways that either advance their mission or enable them to address costs such as printing or publicity or long distance phone calls or even, staff vacations. As the movement gains momentum, we are likely to see more organizational incentives emerge. But the bottom line will also be: avoid any conversion that equates Time Credits with the market value of the labor. Author Unknown
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