Can you really deduct that as a charitable contribution?

One of my friends once told me that she was never upset when she had to pay library fines because she supports and loves her local library.  Perhaps it is a very small price to pay for the ability to borrow such a variety of great books and not have to actually purchase these books and publications.  This is completely appropriate as long as my friend does not incorrectly assume that she can actually take a tax deduction for the library fines she’s paid.  Certainly, she can make tax deductible gifts to her local Friends of the Library organization, but she should not confuse this fee/fine for service as a ready-made tax deduction.

There are many instances where individuals assume that a tax deduction exists even in places where it does not.  Did you know that each year, the IRS publishes a list of Dirty Dozen Tax Scams?  In this year’s 2011 edition, Don’t Fall Prey to the 2011 Dirty Dozen Tax Scams, the IRS included “Abuse of Charitable Organizations and Deductions” as one of the dozen tax scams, what the IRS deems to be the “worst of the tax scams”.  Nonprofit organizations should take care to ensure that they do not serve as a willing participant by allowing or setting up scenarios that allow its donors to misuse tax-exempt organizations and shield income or assets as a result.  The IRS Dirty Dozen Tax Scams report specifically calls out inappropriate and illegal situations where donations are overvalued and donors are even able to buy back the items at a price set by the donor! These are the “scams” that put ethical tax deductions at risk for the rest of us.

The Standards for Excellence: An Ethics and Accountability Code® for the Nonprofit Sector specifically states that “an organization’s fundraising program should be maintained on a foundation of truthfulness and responsible stewardship.”  The Standards for Excellence code goes on to state that “nonprofits must be aware of and comply with all applicable Federal, state, and local laws. . . ” which includes “complying with laws and regulations related to fundraising.. . .

Members of the Standards for Excellence Institute have access to more information on how you can ensure that your organization is in the best position to comply with fundraising laws and regulations, you may be interested in the Standards for Excellence educational resource packet on Fundraising Practices, which includes the helpful Standards for Excellence publication, “Disclose It: A Charitable Nonprofits’ Guide to Disclosure Requirements”

For information on how you can join the Standards for Excellence Institute, please visit our website.


About Amy Coates Madsen

Amy Coates Madsen serves as the Program Director of the Standards for Excellence Institute.
This entry was posted in Financial Management, Fundraising, Legal. Bookmark the permalink.

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