Non Profit Fundraiser Distribution Question

[kpavlovic]

What is the name of your state (only U.S. law)? CA

Hello. I am president of a non-profit organization and we held a benefit for a woman who has breast cancer since much of her treatment isn't covered by insurance.

We raised over $20k for her and am now waiting to disburse a check to her because they have requested that we give part of the money to her directly in the form of a check and that with the remainder of the money, we pay to her creditors. The reason why they ask this is because they would like to avoid paying taxes on the amount above the legal dollar amount limit.

Is this appropriate? Is it legal? Where can I find documentation to support whether it is or isn't?

Honestly, it sounds inappropriate to me and a red flag went off in my head the second that it was asked. Phrases pass through my head like, "Tax evasion", "fraud". Am I right?

Any insight or advice would be much appreciated.

-Karen

[LdiJ]

Originally Posted by kpavlovic

What is the name of your state (only U.S. law)? CA

Hello. I am president of a non-profit organization and we held a benefit for a woman who has breast cancer since much of her treatment isn't covered by insurance.

We raised over $20k for her and am now waiting to disburse a check to her because they have requested that we give part of the money to her directly in the form of a check and that with the remainder of the money, we pay to her creditors. The reason why they ask this is because they would like to avoid paying taxes on the amount above the legal dollar amount limit.

Is this appropriate? Is it legal? Where can I find documentation to support whether it is or isn't?

Honestly, it sounds inappropriate to me and a red flag went off in my head the second that it was asked. Phrases pass through my head like, "Tax evasion", "fraud". Am I right?

Any insight or advice would be much appreciated.

-Karen

When you have a fundraiser for someone you have a bunch of people giving them gifts. Its not taxable income. Therefore no one can commit tax fraud. In fact, with fundraiser money most of the time its preferred if its paid directly to the creditors to ensure that it goes for what it is intended to cover.

[kpavlovic]

I understand what you are saying, however, it is not multiple checks from different sources. My organization used it's tax is number to procure donations which provided the ability to throw the benefit event. All donations were made to my organization and were tax deductible. We are now dispursing the funds. Does what you state still hold true?

Thanks, again!

[LdiJ]

Originally Posted by kpavlovic

I understand what you are saying, however, it is not multiple checks from different sources. My organization used it's tax is number to procure donations which provided the ability to throw the benefit event. All donations were made to my organization and were tax deductible. We are now dispursing the funds. Does what you state still hold true?

Thanks, again!

Is your organization a not for profit organization?..a valid charitable organization?

[tranquility]

I have special sensitivity to this and think it is a wonderful gesture, but are you allowed to have donations which benefit a specific person?

I don't see "fraud" here so much as possible errors which could cause problems with your charitable status. I don't think those who donated can deduct the amounts given. There should not be a taxable event to either you or to the eventual receipient.

[kpavlovic]

Originally Posted by LdiJ

Is your organization a not for profit organization?..a valid charitable organization?

We are a non-profit organization.

[kpavlovic]

Originally Posted by tranquility

I have special sensitivity to this and think it is a wonderful gesture, but are you allowed to have donations which benefit a specific person?

I don't see "fraud" here so much as possible errors which could cause problems with your charitable status. I don't think those who donated can deduct the amounts given. There should not be a taxable event to either you or to the eventual receipient.

We are in international non-profit organization for moms with hundreds of chapters. I believe that each chapter has it's own tax id number. We have often fundraised (on a much smaller scale) to keep our organzation going and also help moms who really need it. We have always allowed donors (particularly when they are larger organizations who require a letter with a tax id number) to use our tax id number to write off their donations.

When we first began this large scale event, I checked with our area and regional coordinators to see if it was appropriate and they had advised me that it was. I think that all of us have gotten in over our heads on this and I have no resource to give me advice that I can trust. I feel like our regional/area coordinators know as much about non-profit organizations as I do, so I am looking for "legal" advice.

My husband has told me that as president of this chapter, we are personally liable for any financial indescretion, so I am worried. Our intentions were only to 1 - help another human being and 2 - do what is legal and right by our organization. We are a very small organization and our treasury rarely holds over $1000. This is a lot bigger than any of us anticipated or know how to handle.

But what is done, at this point, is done. If we have done something we shouldn't have, there is little we can do to change it. Of course, if there is a problem we will take full responsibility. If we have done anything inappropriate, we don't want to continue on that path, so now the question we are faced with is....

Do we write one big check to the person who we sponsored the benefit for? Or do we make out multiple checks to her creditors (all medical... the recipient of this benefit is a cancer patient and mother of 2 young children).

I REALLY appreciate all of the previous comments and any further insight anyone might have.

Thank you!

[LdiJ]

Originally Posted by kpavlovic

We are in international non-profit organization for moms with hundreds of chapters. I believe that each chapter has it's own tax id number. We have often fundraised (on a much smaller scale) to keep our organzation going and also help moms who really need it. We have always allowed donors (particularly when they are larger organizations who require a letter with a tax id number) to use our tax id number to write off their donations.

When we first began this large scale event, I checked with our area and regional coordinators to see if it was appropriate and they had advised me that it was. I think that all of us have gotten in over our heads on this and I have no resource to give me advice that I can trust. I feel like our regional/area coordinators know as much about non-profit organizations as I do, so I am looking for "legal" advice.

My husband has told me that as president of this chapter, we are personally liable for any financial indescretion, so I am worried. Our intentions were only to 1 - help another human being and 2 - do what is legal and right by our organization. We are a very small organization and our treasury rarely holds over $1000. This is a lot bigger than any of us anticipated or know how to handle.

But what is done, at this point, is done. If we have done something we shouldn't have, there is little we can do to change it. Of course, if there is a problem we will take full responsibility. If we have done anything inappropriate, we don't want to continue on that path, so now the question we are faced with is....

Do we write one big check to the person who we sponsored the benefit for? Or do we make out multiple checks to her creditors (all medical... the recipient of this benefit is a cancer patient and mother of 2 young children).

I REALLY appreciate all of the previous comments and any further insight anyone might have.

Thank you!

At this point it doesn't matter who you write the checks to. It doesn't matter if you write the check to her or to her creditors. You can be more certain that the medical bills get covered if you pay those directly.

I think that you are probably ok. Its ok for a non profit organization to hold a fundraiser for a specific person. What's not ok is for a donor to want to give a gift to a specific person, and makes a deal with a non profit organization to run their donation through them in order to avoid gift tax or to make their gift deductible.

[kpavlovic]

Thank you so much. That really puts my mind at ease.

[tranquility]

By definition, I believe it cannot be a "charitable contribution" if the purpose is set aside for a specific individual. While the reason for the definition may be as LdiJ says, the effect of the rule is different.

[LdiJ]

Originally Posted by tranquility

By definition, I believe it cannot be a "charitable contribution" if the purpose is set aside for a specific individual. While the reason for the definition may be as LdiJ says, the effect of the rule is different.

Well, I won't argue on the issue of whether or not the contributions are deductible. The last time I researched the particular issue was when I working on my masters and my memory on that part of it is not as clear as I would like. I wouldn't completely rule it out however without doing some case law research.

[tranquility]

Since I would also prefer a little time in research, I suggest to the OP they seek professional assistance.

Even though we've not met, for some reason I'm thinking neither LdiJ or I have much time for research right now. Right luv?