My community concert band was recognized as a 501(c)(3) charity last November. I am the treasurer but I know nothing about 501(c)(3)s and I don't have any idea where I can get information. I made receipts for the band members to fill out themselves for tax purposes. In the description, they just have to circle which membership they have (I wrote the $ amounts next to each one of the four types). I included all info, including our tax ID. One of the members says that this is not proof - that he needs his name, the amount, and the date written by me? Is this correct?
I would be remiss if I failed to say you could learn a lot by subscribing to Nonprofit Issues® and reviewing our archives, and particularly our Ready Reference Pages. You can also get information by reading the IRS publications on nonprofit tax rules that are available free on the IRS website.
With regard to your specific question, it sounds like your member is probably correct. Assuming that the membership payment is more than $250, in order to take a charitable contribution deduction, the donor must obtain an acknowledgment from the charity that states the amount of the gift, whether the donor received any goods or services in return, and if so, the value of those goods or services. (See Ready Reference Page: “IRS Requires Substantiation of Contributions”) It doesn’t sound like you provided any of that information.
If you did provide goods or services in return (like the right to play in the band or tickets for concerts) the payment may not be deductible at all. If the payment is more than $75 and goods or services were provided, your organization is required to notify the donor/payors of the value of the goods or services so that they deduct only the amount paid above such value. (See Ready Reference Page: “Charities Must Set Value on ‘Quid Pro Quo’ Gifts”)
Allowing donors to figure out their own receipts has caused charities a lot of problems over the years, particularly those charities receiving gifts of household goods and clothing. The situation became so bad that the IRS changed the rules for such gifts. (See Ready Reference Page: “Congress Passes Charitable Reforms, Approves Limited Giving Incentives”) It is not a good practice and I would recommend that you tell them what they need to know yourself (and what you are required to tell them if it is a “quid pro quo” payment).
Still need more information on accepting gifts? See our webinar - Gift Acceptance Policies and Agreements in the COVID 19 Era
Comments
I am a resident of a CCRC [continuing care retirement community], a senior living community, that is a 501(c)(3) facility. Since we have a no tipping policy for associates of our facility, the residents have developed a program for collection of cash and presentation to the associates as a Christmas bonus. We have taken the position that this gift is for their services to us and treat this as compensation for them. Since our CCRC is capable of assisting us as to carry out our mission, the CCRC has agreed to make the collection and help us with the payroll deduction and distribute our donations to them. We have now been advised that since we make our donation checks to the CCRC, we can take a charitable deduction, even though there is no charitable intent on the part of the residents. Would appreciate your thoughts on this "scheme".
If your residents' association is determining which of the employees gets how much of the Christmas bonus, you are probably making direct gifts to the employees and the gifts will not be deductible. If you make a lump sum gift to the CCRC, a charitable organization, and the charity determines how to distribute the gift, you can probably claim the deduction. I wouldn't say that there is no charitable intent behind this gift. You don't get anything direct in return and you enable the charity to pay its employees more than it might otherwise do. --Don Kramer
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