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Nonprofit Law/Tax-Deductible Construction Expenses


I operate a nonprofit organization (public charity status) that assists individuals living with spinal cord injuries (I myself am a quadriplegic).

I am in the process of building a home which would serve as my primary residence. However, I would also operate the nonprofit out of the home.
Additionally, it would be equipped with adaptive exercise equipment for those with spinal cord injuries who wished to come work out for free. It would not be advertised as a gym, but available upon request.
Finally, the whole house would be ADA and at some point I may take on a roommate or two who is living with paralysis.

If companies/contractors donate any building materials or services to the construction of the property, are they able to write this off as a tax-deductible expense?

As to charitable deductions, see IRS Publication 526 "Charitable Donations" which is available at and specifically, as to volunteer services, see at the top of page 5 there is a chart "Table 2" that shows that a taxpayer may not deduct as a donation the value of the taxpayer's time or services.

Contractors may receive a deduction for a donation of building materials to a public charity.  If the materials are then used for the construction of a building that is owned by the 501(c)(3) organization it would be proper for the 501(c)(3) organization to give the contractors an acknowledgement of a donation, but it would not be good for the exempt organization to solicit building materials or give an acknowledgment of donation if the real property is owned by a non-exempt entity, such as an individual, who is controlling the 501(c)(3) organization, which appears to the situation you presented here.  The reasoning by the IRS is that there would be prohibited inurement.

Internal Revenue Code section 501(c)(3) which is available at (on page 2, first column) provides, in part, that the 501(c)(3) organization must be one of "Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable ...or educational purposes ... no part of the net earnings of which inures to the benefit of any private shareholder or individual".

The term "private shareholder or individual" is defined in regulations 26 C.F.R. 1.501(a)-1(c) "The words `private shareholder or individual' in section 501 refer to persons having a personal and private interest in the activities of the organization." on the right column of page 2

Inurement (benefits to insiders) is discussed by the IRS at tege/eotopicc90.pdf and specifically note, on the bottom of page 10, "even a minimal amount of inurement can result in disqualification for exempt status, whereas private benefit must be substantial in order to jeopardize exempt status."   

  If, in fact, the real property is owned by the 501(c)(3) organization, then there arises the issue as to whether you could live there without paying at least reasonable rent, but you did not ask that, so I have not gone into the details, primarily because it appears that the 501(c)(3) organization does not own the real property.
Harvey Mechanic
Attorney at Law

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


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. 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 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 "" without the quotes and then add your search terms before hitting enter.


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.


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

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

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