Contribution Question - Tricky Situation

[JohnH]

This is not a hypothetical situation (although it hasn't been completely resolved yet).
The situation is real and the figures are close to actual.

I know someone who went on a mission trip, sponsored through a valid 501c(3) organization. This was a genuine mission trip (no disguised vacation or non-mission days involved). He paid $3,800 out of his own pocket via a contribution to the organization, which in turn covered his trip expenses for airfare, lodging, food, etc. Clearly a deductible contribution.

When he returned, he was surprised to find that his phone carrier had failed to follow his instructions to keep his international data plan in place following a previous trip. Consequently, he was billed $7,000 in data usage while in a foreign country. The data usage was to stay in touch with family back home, send ministry team pictures, videos and updates on the mission trip to his church, social media, supporters, etc. Presently he is negotiating with the phone carrier to get the charges reduced to about $400 or so - basically what they should have been under the international data plan.

So what's his situation if he is unsuccessful in his negotiations and must pay the $7,000 in full?
Does he have a valid $7,000 charitable deduction for the data charges?

[Roland Slugg]

Sounds like a purely personal expense to me. How can it be a charitable contribution? He won't be paying the $400 (or whatever it turns out to be) to the 501(c)(3) org.

[TXEA]

I think the $7000 or the $400 would be a personal expense. Either amount would not contributed to the charitable organization. Finally, even if contributed to the charitable organization, the amount seems like it would still be an expense applicable to the individual. How would you even break out a portion of the expense used to update the organization and to update family and friends?

[JohnH]

It doesn't have to be paid to the organization in order to be tax deductible.
(For example, airfare purchased directly by the participant - rather than by the organization - is tax deductible).

The "personal expense" question is more relevant, but again there is no clear guidance that I can find. Part of the reason for updates and communication is to provide info to people who contribute to the organization's purposes, and of course part is for routine family communication. There is a mixed purpose for the communication but a reasonable allocation would seem possible. It is clearly not purely personal.

[BHoffman]

If he paid $3,800 out of pocket as a deductible contribution and the organization turned around and used the funds to pay his expenses, can't he simply treat his cell phone bill the same way? Donate the $7,000 or $400 or whatever and have them issue the payment to the cell phone company?

[JohnH]

I like the way you think.
I really do.

[BHoffman]

You know how to whistle, don't you, JohnH? You just put your Rev Procs together and... post

Take THAT shameless hussy RitaB!!!!!! MUUUUUHAHAHAHAHA!!!

[Corduroy Frog]

The Pig won't Fly

John, this is tragic that he can't take advantage of a $7000 misfortune, but I don't see any way this
is anything but personal. You do have an argument resulting from "cause and effect" but beyond that
we can't take a magic wand and make a charity contribution out of a phone bill, as in "Once a pig, now
a swan."

Paying the bill through the charity fails for lack of substance over form. Does this guy have a business?
If not, can he start one? This is hardly a "ordinary and necessary" expense but it could be paid as a
business expense with continual negotiations with the provider.

REAL recovery may rest with the provider. The policy is very bad, and is specifically designed as a
"gotcha" to enhance revenue by sticking the customer. They won't be interested in negotiating the
charge downward, but they would also not be interested in several hundred people church people
knowing what happened and their reluctance to lower the fee.

[ATSMAN]

>> The data usage was to stay in touch with family back home, send ministry team pictures, videos and updates on the mission trip to his church, social media, supporters, etc.

John H, if this was a trip sponsored by the Church to further its mission, then except for the data used for sending pics to family, the rest of the usage falls within the scope of the mission, IMHO.

So roll the dice man!

[BHoffman]

The Pig has Wings

There are actually a few different transactions occurring here:

The TP donated money in the amount of $3800 to the charity. That is tax deductible all by itself.

The TP accrued costs for charitable works in the amount of $3800. If he had paid the expenses, then that is also tax deductible all by itself for a total of $3800 + $3800 = $7600.

The charity reimburses TP for his accrued costs, so that zeroes out. He's left with his original tax deductible donation of $3800.


Same thing for the phone bill. TP would never have accrued that phone bill had he not been on a mission for the organization. It's an out-of-pocket charitable expense (Pub 17).

He donates $7000.

AND

He accrues out-of-pocket charitable expenses of $7000

He has $14,000 in charitable donations if he paid the phone bill out-of-pocket

BUT

The charity pays the out-of-pocket accrued charitable expenses of $7000.

He's left with the original donation of $7000.

[Corduroy Frog]

Hope Springs Eternal

Beth, if your magic wand can change a greasy pig into a beautiful swan, maybe there's hope for me!!

Not to mention the flamboyant Rita B, although she really doesn't need the help like I do...

[JohnH]

I like the way you think more and more. Fact is, much of the data plan usage is to send pictures and updates to various donors who support the overall ministry. (Current supporters and future ministry supporters as well).

For example, there is no quesiton that if the participant paid for a newsletter to be sent to the donors with pictures and information, the payment would be a valid charitable contribution. Social media is simply another means of communication, except in real time (which has additional value).

Participants also use their phones for texting messages to one another to coordinate travel and logistics while on the trips. So I think the idea that the data plan usage has significant ministry-related purposes is a given.

And I agree that the personal calls & contacts are only incurred because of the mission trip, which itsself is clearly tax deductible. As far as I know, business travelers are not required to exclude the cost of their personal calls back home when they are away on business. Seems like the same standard would apply to this type of travel.

The only restrictions I can find regarding deductibility of valid mission expenses relate to such things as side trips of a vacation nature, which require allocation of expenses. Personal purchases of gift items, souvenirs, etc are not deductible of course. But when comparing these purely personal expenses to the data plans, there is a distinct differnce which argures in favor of deductibility. I had never really questioned the deductibility of data plans until this issue of the amount popped up.

[JohnH]

I'm parking this little tidbit here for now. It seems to be enlightening even though the initial question dealt with another issue, but I'm not familiar with the source. Planning to do some more research on it.

"...Federal Tax Regulation section 1.170A-1(g) provides the following guidance:
'Unreimbursed expenditures made incident to the rendition of services to an organization contributions to which are deductible may constitute a deductible contribution. For example, the cost of a uniform without general utility which is required to be worn in performing donated services is deductible.' Expenses which were incurred as a result of performing services to a charitable organization would appear to be deductible."

[Lion]

Let me play devil's advocate. If he had communicated only with family, then his bill would've been $7,000. Because he communicated with family and donors, his bill was still $7,000. It seems he had no extra costs due to his communications with donors. (Plus, he could've waited until he was home.) I volunteer for Appalachia Service Project and don't get cell service in the hollers of Appalachia. I did use my phone to take pictures. When we got to about Maryland and I had service, I did text pictures to church to run in Sunday's bulletin. But, I do not try to deduct my cell bill while on ASP in VA.

[RitaB]

I See How It Is

You know how to whistle, don't you, JohnH? You just put your Rev Procs together and... post

Take THAT shameless hussy RitaB!!!!!! MUUUUUHAHAHAHAHA!!!

Beth, if your magic wand can change a greasy pig into a beautiful swan, maybe there's hope for me!!

Not to mention the flamboyant Rita B, although she really doesn't need the help like I do...

I can't turn my back for five minutes...