Friday, March 29, 2013
In 2006, the co-founder of NDM Ferret Rescue Sanctuary, Inc. made forty-four (44) contributions to her organization totaling $10,022. Seventeen (17) of those contributions, totaling $7,629, were each for $250 or more. While the IRS was satisfied that the co-founder actually made the contributions and that the organization was a valid charity, the IRS did not allow deductions for the seventeen (17) contributions over $249.99.
This is because the IRS requires a written acknowledgement from the donee for a charitable contribution of $250 or more. Moreover, the IRS imposes a timing requirement for the acknowledgement. The person wanting to claim the deduction must get the acknowledgement “on or before the earlier of” the dates he/she files the return for the year the contribution was made or the due date, including any extension, for filing the return.
The obvious moral of the story is that if you are a person who made a contribution of $250 or more to a qualified organization and you want to claim a deduction, get an acknowledgement before you file your return.
Interesting, however, is the ease with which the acknowledgement condition can be met. In the case involving NDM Ferret Rescue, one option for the co-founder would have been to write herself a letter. She would have had to provide the letter to the IRS, however, only if the deduction was questioned in an audit. Does this make much sense? What are the likely policy reasons for this requirement?
Thursday, March 28, 2013
The subject of today’s post comes from a Huffington Post article discussing the fears present in the nonprofit sector. The article provides a list of the different forms of “Nonprofit Fear.” The list includes:
- Fear of making an investment
- Fear of change
- Fear of losing a donor
- Fear of being honest
- Fear of money
- Fear of competition
The article claims these fears are disabling and they prevent nonprofit organizations from realizing their full potential. The author suggests that the biggest fear of nonprofits is the fear of making an investment.
For many nonprofit organizations, the fear of making an investment is a legitimate one. Many nonprofit organizations do not generate a lot of money, their funders are tired, and they are often working just to get by. However, the article argues that if more nonprofits would make an investment in transformation, this change would help to effectuate the organization's vision. Essentially, this type of an investment is one in which nonprofits investment time, energy, and mind share to come up with new opportunities. It involves the organization taking risks in situations when it normally would not be inclined to do otherwise.
Wednesday, March 27, 2013
Overtime, the YMCA has become one of the largest income earning charities in the United States. Some private health facilities see the YMCA’s exempt status, which enables them to operate and offer service for less, as an unfair advantage. Consequently, some private health facilities are frustrated because they view tax-exempt health facilities like the YMCA as competitors, not as charities.
Recently, the owner of a series of private health facilities in Kansas spent $45,000 in campaigns of senators who would build support in the Legislature for property tax-exemption applicable to private health facilities statewide. The owner of the private health facilities argues that its largest competitor in nearly every city home to one of his facilities is a tax-exempt facility. Further, the owner argues it is time to treat all health club facilities the same.
Is there anything troubling about the competition argument? Are there any concerns with adding private health club businesses to the list of organizations receiving property tax-exemption? What impact, if any, would adding private health clubs to the list have on the local tax base?
Tuesday, March 26, 2013
A recent article in The Chronicle of Philanthropy uses the inequitable salaries of nonprofit employees as an example of “ economic bullying.” The article adopts the position that civil society accepts this sort of economic bullying and offers social exploitation as one the reasons. Interestingly, while the article suggests that the nonprofit world is a victim of social exploitation, it also suggests the nonprofit world is a victimizer.
The argument for the nonprofit world as victimizer is that it underpays women and human-service workers and relies heavily on unpaid volunteers for essential labor. The article goes on to suggest volunteerism in the nonprofit world presents problems because nonprofits have failed to articulate their value to society or what it costs to provide that value. Consequently, nonprofits are victimizers because they are guilty of engaging in the practice of paying people as little as possible.
To be fair to the nonprofit world, the article suggests the government plays a contributing role in social exploitation because as the major purchaser of social services, the government forces costs down to balance the budget. Still, given the characteristics of nonprofit and other exempt organizations, what alternatives are available to prevent from contributing to social exploitation?
Monday, March 25, 2013
It is that time of year again. It is tax season! So what does this mean for people who made donations to an exempt organization last year?
For people who itemize deductions on their federal tax return, one of the most popular deductions is the deduction for charitable gifts. However, for the donation to be deductible, the IRS requires the donation be made to a qualified charitable organization. To assist people wanting to utilize the charitable gift donation, the IRS has created an online search tool that enables people to find out whether the exempt charity to which they have donated is able to receive tax-deductible charitable contributions.
Generally, the IRS allows people to utilize the charitable gift deduction for donations of money and property made to a qualified charitable organization. While the value of cash donations are easily determined, donations of property must be determined by the property’s fair market value at the time of contribution.
Determining the value of the fair market value, and thus the benefit the donor stands to receive, is often a complex process and it raises interesting questions regarding the motives driving people to make donations of property. Do people donate property to an exempt organization because they believe in its purpose? Is it more likely that people donate property for tax benefits? If so, what are the benefits a person stands to receive from donating property? How are those benefits different from the benefits of donating money?