Deductibility in Question

[Snaggletooth]

I would think most of you being in the accounting/tax industry get "volunteered" to serve as Treasurer for various organizations that don't pay you anything. After agreeing to serve on three such time-consuming activities, I had to draw the line and say "NO MORE." Maybe your experience is different, but I suspect if you've been around very long, you know exactly what I'm talking about.

Be that as it may, one of these is our family cemetery association, some 30 hours per year. In addition to free time, I donate about $150 annually. There is Form 1023, which is an application for 501(c)(3) status, and if approved, deductibility for donations is guaranteed.

We refused to pay the user fee of $900, and sure enough, IRS returned our Form 1023 with a dun for $900 or else the application would not be approved.

What is the impact? I understand that the deductibility for donations is NOT guaranteed, but does this mean that donations are definitively non-deductible? I don't think so.

What say ye??

[erchess]

I don't like

finding myself in disagreement with you Snags but I don't see how an expense can be deductible unless there is a statute saying that it is deductible. Is there something I don't know about in the code that lets a cemetery association receive deductible gifts even without registering and paying the fee? I was definitely under the impression that there was not but I'm certainly open to hearing that there is.

[Snaggletooth]

Statute

Don't worry about disagreeing with me. Agreement is not the objective when truth is sought.

Form 1023 is relatively new in the timeline of tax law. It is borne not of code or regs, but instead is hewn from a set of principles the IRS believes to be prerequisite for their own permissions. It's chief purpose is to serve as an application screen and collection vehicle for IRS user fee. Deductible contributions have been around much longer than the 1023.

Is successful application both necessary and sufficient? I agree that it is sufficient, but not certain that it is necessary.

The "code" itself under §501(c) lists perhaps a couple dozen different types of non-profit entities. A cemetery association is just one of them, being §501(c)(13). This section has been around much longer than the 1023, and much longer than their user fees.

Again, there is no question that an approved application of Form 1023 would guarantee deductibility of donations. The question is whether failure to submit the 1023 guarantees that the donations NOT deductible. The certainty of one statement does not always mean that the inverse of that statement is certain as well.

[Davc]

1023 is not required for deductability of contributions as long as the org is below the gross receipts threshold (I believe 5k annually). The confirmation letter from the IRS is usually sufficient but if the individual making the contribution is aware that the org is engaged in activities that are not allowed for a 501(c)(3) then contributions are not allowable for that individual.

Example: Directors of "charities" that were funneling money to terrorists organization that contributed to those organizations.