Thursday, July 18, 2019
Aren't donations to charities intended for crime victim compensation charitable contributions? Whose Advising the Virginia Governor otherwise?
Do organizations set up to collect and distribute donations to victims and victim families of mass shootings qualify for tax exempt status under IRC 501(c)(3)? And if so, are contributions to those organizations deductible under IRC 170? Of course, right? What could be more charitable? Sadly, mass shootings are becoming . . . well . . . ubiquitous. As the map above shows, one of the latest mass shootings happened in Virginia Beach on May 31, when a gunman killed 11 people, wounding 4, before being killed himself in a hail of police gunfire. So I am not quite sure why the Virginia Governor had to certify that a 501(c)(3) doing just that -- collecting and donating funds to victim and victim families -- is performing "an essential government function." His staff apparently thinks that without that designation, donations to the organization may not be deductible under IRC 170. Here is the Governor's July 16 press release:
RICHMOND—Governor Ralph Northam today issued a proclamation recognizing that the Virginia Beach Tragedy Fund (Fund) seeks to perform an essential government function and urged the Internal Revenue Service (IRS) to follow suit. The Fund, which was established by United Way of South Hampton Roads in partnership with the City of Virginia Beach, must receive this designation in order to confirm that donations to the Fund will be tax deductible.
“Members of my administration have been in close and frequent contact with officials from the City of Virginia Beach and have offered to assist the victims and families affected by this senseless tragedy,” said Governor Northam. “As a result, I am issuing a proclamation that the Virginia Beach Tragedy Fund seeks to perform an essential government function, and I urge the Internal Revenue Service to find the same. The families of the victims and those injured in the tragic shooting in Virginia Beach rely upon this critical financial assistance and we must ensure they are receiving the support they deserve.”
Current IRS guidelines establish that donations to victim assistance funds are generally considered personal gifts and therefore are not guaranteed to be tax deductible. In June, the IRS confirmed that families of the victims and those injured are exempt from paying taxes on money they receive from the Fund. But the IRS has not yet certified that contributions to the Fund, which have come from thousands of individuals, reaching more than $3 million, will be tax deductible.
Here is the Governor's July 16, 2019 proclamation regarding the "Virginia Beach Tragedy Fund:
Virginia Beach Tragedy Fund
WHEREAS, on May 31, 2019, 12 people were killed and four people were wounded in a mass shooting at a municipal building in the City of Virginia Beach, Virginia; and
WHEREAS, the shootings were horrific, jarring, and heartbreaking; and
WHEREAS, the victims and their families incurred medical, funeral, and other expenses as a result of this tragedy; and
WHEREAS, after this terrible tragedy, there was an outpouring of generosity by people and businesses offering monetary donations to help the victims of the mass shooting and their families; and
WHEREAS, the United Way of South Hampton Roads, a nonprofit §501(c)(3) organization, and the City of Virginia Beach created the Virginia Beach Tragedy Fund (Fund); and
WHEREAS, through the Fund, the City of Virginia Beach and the United Way of South Hampton Roads are working to ensure that monetary donations are used to provide financial assistance to the victims of the mass shooting and their families; and
WHEREAS, the Fund seeks to address the loss suffered by victims and their families, memorialize the heroism of first responders and community members, and assist the victims, their families, and the community in recovering from this tragedy. Such services lessen the burdens of government;
NOW, THEREFORE, I, Ralph S. Northam, do hereby recognize that the Fund seeks to perform an essential government function with respect to the Virginia Beach mass shooting by lessening the burdens of government and promoting the health, welfare, and recovery of the victims, their families, and the Virginia Beach community.
The United Way South Hampton Roads website states "[p]lease note, donations given to victim assistance funds are generally considered personal gifts and are not guaranteed to be tax deductible so you will not be receiving a tax donation receipt." Apparently, it is this qualifier that motivates the Governor's lawyers to have the fund designated as something that performs an "essential government function." But it seems to me that this approach is like that old game "Twister," (often played on that corny show, "The Brady Bunch"). I mean, why go through all these contortions? United Way is definitely a 501(c)(3), contributions to which are tax deductible. It has set up a fund to help crime victims and donations for that purpose, just like donations to assist victims of natural disasters -- are surely deductible, n'est-ce pa? What am I missing here? Why go through the trouble of proclaiming that the fund is performing an "essential government function," which by the way is a phrase nowhere found in IRC 170 and seemingly has nothing to do with charitable contributions. Instead it is found in IRC 115 and, if applicable, would make the fund exempt from federal taxation. Who thought doing so would resolve whatever charitable contribution uncertainty I am not seeing?
Darryll K. Jones