Charitable deductions

The IRS granted them 501(c)(3) status, so contributions to it are deductible. Whether it should be a 501(c)(3) in the first place is another issue, but not one I think we have to worry about.

That is not going to happen.

The 501(c)(3) earns 99%+ of its revenues from fees for certifying judges and sanctioning competitions which it then advertises to its members as volunteer opportunities. On the face of it without any additional paperwork, are the reasonable travel and lodging expenses of the judges deductible as a charitable contribution even though the organizers (who rarely make a profit) are not 501(c)(3)'s?

Dick

Dick Adams wrote: ...

Think would have to see what charter of the organization says about its mission and how this fits as well as what the disposition of the income from these fees is. I'm still feeling "not so much" based on the presentations been given as noted before but they didn't cover precisely this situation, granted.

To me, that the organization isn't listed is somewhat telling; I noted in reading the IRS doc's there's an 800 number that says one can call as a prospective donor to find out if any organization is a qualified one. Whether there's more to that than the phone-monkey looking up the web copy of the list I don't know. I guess it would be of some interest if you were to call and see what they said (although maybe you don't want to know :) ). I thought I had copied it to paste before I closed the window but seem to have not done so successfully, sorry...

So the purpose of your travel is to support the goal of the 501(c)(3) organization? Do you meet all the criteria required for deducting charitable travel (e.g. spend sufficient time each day on the charity's business rather than your own recreation)? In that case, I'd say it ought to be deductible.

Seth

Thank you. What I need is a Circular 230 preparer to write a covered opinion to that extent.

Dick

Stay tuned. I'm calculating my fee right now!

ChEAr$, Harlan

I've looked into this issue briefly. If the nonprofit receives fees for sanctioning the event, and part of that is based on supplying qualifying judges, it seems to me that the travel expenses may well be deductible.

See Reg. 1.170-2(a)(2)"

"No deduction is allowable for contribution of services. However, unreimbursed expenditures made incident to the rendition of services to an organization contributions to which are deductible may constitute a deductible contribution. For example, the cost of a uniform without general utility which is required to be worn in performing donated services is deductible. Similarly, out-of-pocket transportation expenses necessarily incurred in rendering donated services are deductible. Reasonable expenditures for meals and lodging necessarily incurred while away from home in the course of rendering donated services also are deductible. For the purposes of this section, the phrase while away from home has the same meaning as that phrase is used for purposes of section 162."

I think I can find the time to write the opinion for you.

Stu

Hopefully, your fee is less than Harlan's. But two letters are better than one.

Dick

Stuart Bronstein wrote: ...

This is only indirectly related, but the question raised a related one in my mind --

I read the above earlier and wondered but could find no clarification--is _any_ organization which is 501(c) (3) an "organization contributions to which are deductible" solely by virtue of being that?

To bring it back to the point of the thread ( :) ); if yes, I agree w/ Stu providing the "sensibility" test is passed.

Sort of. If it qualifies under §501(c)(3) contributions to it are presumptively deductible, unless the organization doesn't meet the requirements of §501(a) and §170(c).

That's not my test, that's the regulation. The only thing I had to read into that was that the nonprofit had to benefit somehow from the services performed for which the deduction is sought.

Stu

Stuart Bronstein wrote: ...

Can you summarize those in a nutshell?

I'm curious as the training I keep referring to implied to me that some fund raising activities can be non-deductible because funds can be earmarked for specific activities or in conjunction w/ some other organizations. Those seemed similar enough to the case of the contests being organized by others than the organization of which Dick is a member as to make it dependent on what the charter actually says and whether they really are qualified or not...

...

Not sure what you're driving at here--I was simply agreeing w/ you that the amount of time involved actually judging, etc., would have to satisfy the reg's which I shorthandedly referred to as the sensibility test. (As in, one of the examples of non-deductible travel was one of essentially pleasure yachting w/ a little whale or other species-counting on the way).

I suppose this turns a bit on what "benefit somehow" really means.

It would seem to me, as a layman, that the nonprofit would not have to directly benefit, in the sense of getting a tangible benefit, such as money. It would seem that having their charitable purpose furthered (in their name) would suffice. Would you agree with this?

I mean, if say, a volunteer with an eligible youth group incurred expenses to take the members on an appropriate outing, that would be a deductible expense, even if the youth group organization itself didn't directly benefit. But the outing would be furthering the purpose of the organization, right?

Basically you're disqualified if you do things you're not supposed to do. Go read those code sections yourself and they will refer you to others. You can find it here:

In the blanks they ask you for title number and code number. Code number is obvious, title number is 26.

It really depends on the specific circumstances. If the earmarked purpose fits within the organization's exempt purpose and no donor gets a personal benefit from it, it's normally not a problem.

In this case the real issue is whether or not the beer judges are doing something that supports the judging organization, or just doing something that supports the beer contests. The impression I have from what Dick said is that the beer contests pay the nonprofit to supply certified judges, and to certify the contests. Because of that, working as a beer judge has a direct benefit to the nonprofit because it gets them money. When you do something that has that kind of direct benefit to a nonprofit, the costs you incur to do it may be deductible.

Stu

In some cases yes, but not necessarily all. If what they do supports the main core of the nonprofit's purpose, then that kind of generalized good work might allow those who do it to deduct their expenses. But if it's fairly tangential the answer is probably not.

In one case a court said that evangelists for the Mormon Church were not directed, controlled or supervised by the church. Still, that was considered to be an important core purpose of the church as a whole, and the expenses incurred in evangelizing were allowed. Smith, 60 TC 988 (1973).

That's not a benefit to the organization but doing something on behalf of the organization that is within its exempt purpose. If it looks like the trip is done primarily for the benefit of the kids and primarily to satisfy its exempt purpose, it may well be ok. But if it looks like an excuse to take a vacation, the IRS will deny it.

Stu

In any case, when you donate to a regular 501(c)(3), part of that money may be diverted to non-exempt organizations. For example, part of your $100 donation to Red Cross would be used to buy gasoline for their cars, part for office furniture from a for profit store, part for a CPA, etc. Yet the $100 donation is allowed in full.

It is all supposed to go to support the exempt function. If you need a CPA to comply with GAAP or tax laws, if you need furniture for the nonprofit to function, if you need to buy gas so you can drive somewhere to perform the exempt function, all those support the organization's function and are permitted. If some of it is paid to someone's child as a bribe to make sure his homework is done, that's not within its exempt purpose, and the person causing that to happen could be required to pay the money back.

Stu

snipped-for-privacy@yahoo.com wrote: ...

That is not "diverted", that's simply paying expenses of operating the organization (and is fully qualified as long as they are using the vehicles or obtaining the services in support of their mission).

"Diversion" would be sending chunks of contributions to individual(s) or other organizations for their own use in ways that do not further the direct objectives of the 501(c)(3). Folks get in trouble for this all the time, particularly those who set up "charities" specifically w/ the intent of skirting the rules so as to actually be profit-makers for themselves (the scam of individual churches is a prime example).

Perhaps he should have written "part of that money may be paid to non-exempt organizations" for operating expenses which is exactly your point.

In the context of this thread, the issue is whether or not the ultimate recipient of cash and/or out-of-pocket costs of rendering services needs to be an exempt organization.

Dick

The answer is clearly no. Charitible organizations receive money because they need it to perform their exempt functions. That means paying for things to those who are not themselves exempt (including employees).

In this context the services need only benefit the exempt organization in some substantial way, and not be primarily for the donor's own personal benefit.

Stu