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Nonprofit Law/Gifts to volunteers from a 501(c)(3)

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Question
Hello. We are considering a small thank you gift for a couple of particularly hard working volunteers. It is not expected by them, is not intended to be considered compensation, and would be a one time thing.  Is this acceptable under IRS regulations? If so, is there a dollar value limit we need to consider? Do we need to report it in any particular way?

Thank YOU for volunteering YOUR time here!

Answer
The IRS explains at http://www.irs.gov/pub/irs-pdf/p5137.pdf on page 87. "A volunteer is an employee under common law if an entity has the right to direct and control the volunteer's performance, not only as to the results to be accomplished, but also as to the methods by which the results are accomplished."

The Internal Revenue Code at section 102(a) provides that gifts are not income.  "Gross income does not include the value of property acquired by gift..."
http://codes.lp.findlaw.com/uscode/26/A/1/B/III/102

However, section 102(c) of the Code has "Subsection (a) shall not exclude from gross income any amount transferred by or for an employer to, or for the benefit of, an employee...."

Therefore, any gifts to volunteers by employers are treated like taxable compensation.  There is no dollar value limit, but, if the volunteers are not officers or directors, I have not ever seen any enforcement by the IRS for any one-time small gift.

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather more information.  

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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