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Nonprofit Law/corporate giving program

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Question
I am in the process of setting up an LLC which will sell products.  I would like to have a portion of the sales price be donated to a specific charity (a 501c3 entity)in my community.  I would like to advertise that a portion of every sale will go to that nonprofit and I am unsure how to handle the process without causing difficulties with taxing authorities.  It seems like the best way would be to simply make the donation myself and take the deduction myself, but I was wondering if there is a simple way for the buyer to get the deduction without my having to include the charitable portion being included in my sales / tax figures.

Answer
In the situation you propose, your LLC is promoting the sales and handling the proceeds and not giving the purchasers an option to donate.

A charitable contribution must be made voluntarily and with donative intent. U.S. v. American Bar Endowment, 477 U.S. 105 (1986). In American Bar Endowment, a membership organization maintained a group insurance program for its members.  Every year, a portion of the insurance premiums paid by members were refunded the organization. As a condition of participating in the insurance program, members were
required to assign refunds from their premiums to the organization. The organization used these refunds to fund charitable grants. Members participating in the group insurance program claimed charitable deductions under § 170 for their pro rata shares of the refund amounts that funded charitable activities. The Supreme Court disallowed these deductions, concluding that they were not voluntary. The Court suggested that it would have reached a different result if the organization “were ABE to give each
member a choice between retaining his pro-rata share of dividends or assigning them” to charity. 477 U.S. at 113.

Therefore, your LLC, and not the purchasers of your items, would be able to take the charitable deductions.

I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. Your matter is also controlled by state law and states may differ somewhat with how they would treat such issues. Even though this forum is not for such state law issues, I will advise you that most states require a business like yours to obtain the written permission from the charity before it undertakes such a promotion and, in addition, the state sometimes requires the business to register with the state as holding charitable assets.

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.

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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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