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    Not For Profit

    A 501(c)3 fund in town asked me what type of verbiage they should include on acknowledgments of contributions, something about no goods or services were provided.... Do any of you have the boilerplate phrasing they should use? They should acknowledge in writing donations of $250 and more, yes? And, more to my overall education, what government pubs should I look for to read about nonprofit organizations and/or tax-exempt organizations? (This is a Warm-Up Fund that helps with heating-related expenses for lower-income residents.)

    #2
    501(c)(3) donations

    The footnote to the acknowledgement of the receipt of the donation should read "Donations
    to (name of organization) are exempt from Federal Income Tax under Section 501(c)(3) of the Internal Revenue Code. The (name of organization) has not provided any goods or services for this contribution.

    For more info go to Google and type in IRS Pub. for 501(c)(3) organizations.

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      #3
      Here is the link to IRS Pub 557, Tax-Exempt Status for Your Organization:

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        #4
        Thank you

        Thank you to the Birds and the Bees. I'm sure there's a joke in there somewhere about learning about taxes from the birds and the bees....

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          #5
          Children's Hospital

          I'am looking at an acknowledgment from Children's Hospital of Boston and the PS at the bottom reads "As required by the IRS, please be advised that your entire contribution is tax-deductible; no goods or services will be received in return. Please keep this acknowledgment as your receipt for tax purposes" Hope this helps, even though it's not birds and bees.

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            #6
            Originally posted by John of PA
            I'am looking at an acknowledgment from Children's Hospital of Boston and the PS at the bottom reads "As required by the IRS, please be advised that your entire contribution is tax-deductible; no goods or services will be received in return. Please keep this acknowledgment as your receipt for tax purposes" Hope this helps, even though it's not birds and bees.
            I hate to nitpick, but I've seen that kind of verbiage before and I don't like it. I wouldn't say "your entire contribution is tax-deductible." That's getting away from describing the nature of the contribution from the organization's standpoint and reaching through to give advice about the donor's tax return. Even if the donation is perfectly qualifed under the code, there are many situations where it would not be deductible on the donor's return.

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              #7
              Not nit-pick

              I served on a charter school board. We had the same question and I gave the same answer. The other 20 board members looked bewildered at such a heresy, even though they knew I was a tax professional. Turned out I was the only one that claims standard deduction. In my community being a renter is like a Communist or a serf or something. The board figured only a real American homeowner would donate to the school so they voted for "tax-deductible."

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                #8
                Originally posted by Armando Beaujolais
                Even if the donation is perfectly qualifed under the code, there are many situations where it would not be deductible on the donor's return.
                I hate to nit pic too (not), but name one instence when it would not be deductible on the donor's return. Yes, there are many situtations that would cause the deduction to not provide a tax benefit, such as the 50% AGI limit or taking the standard deduction over itemized deductions, but those situation do not make the donation non-deductible. Those are situations where the benefit of the deduction is lost or carried over to the next year.
                Last edited by Bees Knees; 10-21-2005, 11:30 AM.

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                  #9
                  Originally posted by Bees Knees
                  I hate to nit pic too (not), put name one instence when it would not be deductible on the donor's return. Yes, there are many situtations that would cause the deduction to not provide a tax benefit, such as the 50% AGI limit or taking the standard deduction over itemized deductions, but those situation do not make the donation non-deductible. Those are situations where the benefit of the deduction is lost or carried over to the next year.
                  Ah, Mr. Knees, it may seem we're arguing semantics rather than actual code or reg citations. However, it matters not because I am correct on both counts.

                  Let's look at IRC section 170(b)(1), "Percentage limitations."

                  "In the case of an individual, the deudction provided in subsection (a) shall be limited as provided in the succeeding subparagraphs...[description of contributions]...shall be allowed to the extent that the aggregate of such contributions does not exceed 50% of the taxpayer's contribution base for the tax year..."

                  The deduction "shall be limited." It doesn't say "The contribution is fully deductible but you don't get a benefit."

                  From a practical standpoint, I don't believe it's a good idea for a donee organization to get anywhere near telling a donor how the contribution will affect their tax return.

                  You have Old Lady LuLu whose house is paid for and she's in good health, has little in the way of itemized deductions, then she gives $5,000 to church and they say "It's fully deductible on your tax return." Then Old Lady LuLu shows up in your tax office demanding that you deduct that amount on her return because it says right there in that "official" document it's fully deductible, and church people tell the truth.

                  The charitable organization should not address how a contribution will affect the donor's tax return. That's tax advice, and they shouldn't outta do that.

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                    #10
                    Contribution

                    Thank you, everyone, for your helpful responses. I've read the Pubs and also forwarded the shorter Pub. 1771 to the organization for their reference. You've thought of some points that I had not -- and, that his particular board will probably argue, too! Thanks for all your generous help.

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                      #11
                      Originally posted by Armando Beaujolais
                      Ah, Mr. Knees, it may seem we're arguing semantics rather than actual code or reg citations. However, it matters not because I am correct on both counts.

                      Let's look at IRC section 170(b)(1), "Percentage limitations."

                      "In the case of an individual, the deudction provided in subsection (a) shall be limited as provided in the succeeding subparagraphs...[description of contributions]...shall be allowed to the extent that the aggregate of such contributions does not exceed 50% of the taxpayer's contribution base for the tax year..."

                      The deduction "shall be limited." It doesn't say "The contribution is fully deductible but you don't get a benefit."
                      Ah, Mr. Beau...beaujo...lesaias.... Mr. Armando, we are arguing semantics, and your semantics need some fine tuning. You just quoted the reg that says the deduction is limited. It does not say that it is not deductible. It says the deduction itself may be limited. That means 100% of the contribution is deductible, but that the deductible amount may be limited.

                      That is different than something like code section 162(c)(3) that says "no deduction sall be allowed for any kickback, rebate, or bribe..." One code section says a deduction is limited, the other says something is not deductible. There is a difference, since charitable deductions that are limited are eventually allowed on a future return.
                      Last edited by Bees Knees; 10-21-2005, 11:43 AM.

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                        #12
                        semantics

                        People structure charitable contributions in all sorts of ways. Besides the semantics of whether a donation is limited by income level, there are a number of ways that it would not be deductible--period. Of course filing short form or standard deduction is a choice, but having made that choice the client can not deduct charitable expenses. Donating ordinary income property (such as inventory) with zero basis is non-deductible. A capital asset donated at a loss, while technically deductible, might increase taxes compared to selling. Contributing less than a 100% interest or a future interest or restricting the use of a contribution is non-deductible. Using estate or trust money may be non-deductible. The organization simply does not know, and should not say, what the tax effect will be for any donor.

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