Political Charity

[erchess]

There is a community organization in my area that has organized itself as a Charity with a charter claiming that its goal is to promote a clean environment. They are telling people that they may deduct their contributions. What they're not telling the IRS is that their only activity to promote a clean environment is to lobby local government not to allow a particular concrete plant to be built in a particularly unfortunate location by a company with a particularly bad environmental record at its other facilities in several states. My problem is that my parents and many other clients have made donations.

1. Am I right in thinking that the organization should be organized as a nonprofit to which donations are not tax deductible?

2. What are the potential consequences for the organizers if they get caught in this?

3. What are the potential consequences to the donors if they are caught?

4. What are the potential consequences to me if I get caught in this?

[ChEAr$]

There is a community organization in my area that has organized itself as a Charity with a charter claiming that its goal is to promote a clean environment. They are telling people that they may deduct their contributions. What they're not telling the IRS is that their only activity to promote a clean environment is to lobby local government not to allow a particular concrete plant to be built in a particularly unfortunate location by a company with a particularly bad environmental record at its other facilities in several states. My problem is that my parents and many other clients have made donations.

1. Am I right in thinking that the organization should be organized as a nonprofit to which donations are not tax deductible?

2. What are the potential consequences for the organizers if they get caught in this?

3. What are the potential consequences to the donors if they are caught?

4. What are the potential consequences to me if I get caught in this?

You can check status as a 501c3 on the IRS web site. Unless the "charity" could provide proof that it is so organized and passes muster with IRS, there's no doubt as to the answer.

[erchess]

Sorry I was unclear

1. The charity is on the approved list of charities.

2. In my opinion the only way it could have gotten there was to disguise its activities which consist solely of lobbying State and Local Government Officials to stop a particular concrete plant that I support stopping. The organization lists on its websites a list of its purposes which it says was drawn from its application. It does nothing but lobbying in support of these purposes.

Therefore my questions are

Am I right in thinking that the organization should have been set up as a political organization or in some other category that would not have made donations to it tax deductible?

What could happen to the people who set up the organization and lied to the IRS?

What could happen to taxpayers who donate to the organization and claim charitable deductions?

What could happen to me if I sign as paid preparer returns claiming charitable deductions for contributions to the organization given that we are dealing with a local organization with which I am very familiar?

[ChEAr$]

1. The charity is on the approved list of charities.

2. In my opinion the only way it could have gotten there was to disguise its activities which consist solely of lobbying State and Local Government Officials to stop a particular concrete plant that I support stopping. The organization lists on its websites a list of its purposes which it says was drawn from its application. It does nothing but lobbying in support of these purposes.

Therefore my questions are

Am I right in thinking that the organization should have been set up as a political organization or in some other category that would not have made donations to it tax deductible?

What could happen to the people who set up the organization and lied to the IRS?

What could happen to taxpayers who donate to the organization and claim charitable deductions?

What could happen to me if I sign as paid preparer returns claiming charitable deductions for contributions to the organization given that we are dealing with a local organization with which I am very familiar?

Contributions to any 501c3 are deductible except the portion for lobbying expenses.
Just as when you pay dues to our NAEA, a small portion is not deductible since that share is used for lobbying expenses. So if this is the sole purpose of the organization
(certainly not a charity!), then none are deductible. When the organization files it's annual 990 it must list what funds are used for, and if none are used for purposes other than lobbying, then the organization can lose it's status. Of course when people donate to the organization in good faith, i.e. they don't know no better!, then the deduction is allowed.

However if you feel strongly enough about this, contact IRS and let them know about it.

I know another EA near you who used to work with IRS in exempt organizations. He's retired now but has a practice devoted almost entirely to EO's. If you want to contact him for his opinion, which would be a good idea, let me know and I'll forward you his email.