This example illustrates a common fund-raising issue. Is this right? What other issues may be present? Some of the issues are reviewed at Discussion.
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This example illustrates a common fund-raising issue. Is this right? What other issues may be present? Some of the issues are reviewed at Discussion. |
Example
Jim: Barbara, want to buy a ticket for the fund-raiser?
Barbara: What's the prize?
Jim: A round trip ticket for two for a weekend in Seattle.
Barbara: How much for a ticket?
Jim: They're $50.00 each, but it's all deductible.
Barbara: It's a charitable donation?
Jim: Guaranteed. We've got §501(c)(3) status from the IRS.
A donation must be a gift; there must not have been anything received by the donor in return for the donation. To the extent there is something given back, a quid pro quo, the value of the thing given back is deducted from the donation. The I.R.S has ruled that a lottery ticket has a value equal to the purchase price of the lottery ticket. Jim is wrong, this is not a charitable deduction.
Put another way, there are two requirements to giving a donor a tax deduction for his or her contribution: (1) the donee nonprofit corporation has to have a Section 501(c)(3) exemption from the IRS and (2) the contribution has to be a deduction. Jim is simply wrong when he assures Barbara that her contribution will be deductible because the second requirement is unmet.
Persons who solicit for a nonprofit and mislead donors as to the tax deductible character of the donation expose themselves and the nonprofit to liability, and jeopardize the nonprofit's charitable corporation status.
If Jim is being paid to solicit ticket sales, he may need to register as a paid solicitor.
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