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Nonprofit Law/Contributions for other non-profit organizations

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QUESTION: Our church has received donations from church members designated for other non-profit organizations in other country. Can we accept the donations and pass that to the donor's designated organizations with tax-deductible acknowledgement to the donor?

ANSWER: No. The IRS treats pass-through donations as if the donation was given directly by the donor to the ultimate foreign nonprofit. Contributions to a section 501(c)(3) organization that transmits the funds to a foreign charitable organization are deductible only if it can be shown that the contribution is in fact to or for the use of the domestic organization, and that the domestic organization is not serving as an agent for, or conduit of, a foreign charitable organization. Rev. Rul. 63-252, 1963-2 C.B. 101.

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.

---------- FOLLOW-UP ----------

QUESTION: Thank you for the answer. This is very helpful. Do you know of any IRS publications that provide this guideline that I can use to share the information with our church. If the church set up an external organization support fund with a list of organizations that the church will support and place the donors' designated contributions for the external organizations into this fund. The church then decide on which organizations in the list to receive the donation taking into consideration of the donors' suggestions. Will the contribution in this case be tax-deductible for the donor?

Answer
Your revised plan is generally acceptable to the IRS. Of course, if every time there is such a "donor suggestion" the church agrees to comply, then it appears to be functionally just like a pass-through.

See the IRS Memo "Donor Control" at
http://www.irs.gov/pub/irs-tege/eotopico99.pdf
starting on the third pdf page where the IRS gives a listing of
the factors it would look at to determine whether an organization
that has substantial donor control would be able to obtain and
maintain a 501(c)(3) organization status (and, therefore, allow the
donors to deduct their donations from their taxable income on their
federal tax returns).

On page 18 in a memo entitled "Donor Control" the IRS advised:
--- Start of Excerpt ---
To help clarify the record of the true intentions of a donor at the
time of a contribution, the IRS has suggested that the following
language be used in a receipt for the contribution:
"This contribution is made with the understanding that the donee
organization has complete control and administration over the use
of the donated funds."
--- End of Excerpt ---
http://www.irs.gov/pub/irs-tege/eotopico99.pdf

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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