Tax Attorney? Non-profit deduction question

[sumbride]

I don''t know if we have any tax attorneys here or not, but google is leaving me helpless and I thought I''d give it a shot.

My DH is the treasurer for our neighborhood association, which is a 501c3. A group of neighbors are working on gating their alley, which is quite an expensive project, about $25k. They are collecting funds from everyone to pay for it, and they asked the neighborhood association to hold the funds and write the checks... as a sponsoring organization. They are now asking for receipts for their "charitable contributions" to the association.

DH is unclear whether the money is actually tax deductible or not since the sole purpose of it is to buy the gates for the alley for these particular neighbors. We don''t have any precedence here as this is the first time it''s been done in our neighborhood, but we will be setting a precedent, definitely, as several more blocks are talking about doing it. How can he determine if the money is actually a tax-deductible contribution? Is there anything else to be aware of here?

Thanks for any/all help! I''m trying to calm him down!

 

[baby monster]

A deduction is available for contributions to qualified charities. Publication 78, Cumulative List of Organizations described in Section 170(c) of the Internal Revenue Code of 1986, has a list of organizations eligible to receive tax-deductible charitable contributions. The online version is available on irs.gov

 

[sumbride]

Thanks Baby Monster.

Most of the contributions to the group are deductible, but we suspect in this case they aren''t because the group is only funneling the money so the neighbors can buy their gates. Still not 100% sure though.

 

[Harriet]

The IRS has a non-profit division you can call.

 

[Harriet]

The IRS has a non-profit division. You can call them with your question.

 

[Octavia]

I am not an attorney, but I used to work at a nonprofit, and we couldn't take any donations that were earmarked for specific people. There are different rules for events sponsored by the organization (although the actual deductions for events often end up being a tiny fraction of the ticket cost...but that's a whole other issue) or if it was for a scholarship where trustees -- not the donor -- chose the recipient. But we couldn't "funnel" money just so people could get tax breaks. Solely from my limited knowledge working in the world of 501(c)(3)s, this probably won't fly...but take Harriet's suggestion and call someone who can actually give you advice!

 

[sumbride]

Thanks Octavia and Harriet! I''ll have him call the IRS. It sounds like they may need to find another way to work this project.

 

[gailrmv]

Sumbride,
Do you know if HOA dues are tax deductible? That would be nice....

Re: dues and also re: the gate, I am certainly NO expert but with other tax deductible contributions I think usually you have to have received no goods and services in exchange. I would think that if the gate were purchased as a direct result of their "contribution" it wouldn''t qualify. I''m not sure though!

 

[strmrdr]

I'm not an attorney but do a lot of work for 501c3's this is not legal advise, hire an attorney licensed to practice in your state..

1: as you laid it out the IRS will frown on it.
2: any 501c3 should have a cpa and attorney on retainer for this kind of advise.
3: the state/city may come after the 501c3 for sales tax on the purchase.

 

[strmrdr]

again not legal advise but this is how it was explained to me:
Collect funds for Joe and Jane to buy a car because they suffered a tragedy or there is a documented charitable need is fine as long as its within the charter.
Collect funds from Joe and Jane amoung others just to buy Joe and Jane a new car is not ok.

 

[sumbride]

Date: 6/24/2008 9:01:15 AM
Author: TanDogMom
Sumbride,

Do you know if HOA dues are tax deductible? That would be nice....

I know this! I actually found it while researching this issue... Dues for an HOA are not tax deductible. Ours isn''t an HOA, it''s just a neighborhood association. Our dues are $10 a year/person and as we are a 501(c)3, they are deductible.

I think the final word on the gate issue is that it''s NOT going to work out for them, but I''m also going to caution my DH about the sales tax issue. Thanks for the heads up!