Tax deduction for donors to non-profits if funds first pass through a for-profit?

[tjulia1]

I am thinking of starting an LLC and part of its purpose would be to help collect payments for school fundraisers. Somebody donates some money for the fundraiser through the site, and a portion goes to the LLC toward operational costs, processing fees, etc, and say we then pass 75% of those funds directly to the school (assume we have a contract for this). Here is the question:
Is it possible for the donor to still receive a tax deduction for the 75% value of their payment? For this to happen, I would assume that a letter would come from the school stating that they received that reduced amount from the donor. The issue I'm seeing is that there is not a direct payment from donor to school, so would the school be ok to make this declaration or not?

Any insight on this tax issue is much appreciated! Thanks in advance!

 

[single317dad]

While the answer to your question may be location-dependent (you didn't provide the name of your state), in most cases, school fundraisers are not tax deductible because the person receives an item of like value for their "donation". Only amounts over and above the actual value of the item are deductible, for example, if you bid $200 in a silent auction for a $50 season basketball ticket, $150 is deductible.

"Charitable" type donations to a PTA group, for example, are usually deductible.

 

[FlyingRon]

Federally, donating to a for-profit business IS NOT tax deductible no matter WHAT they do with the money. There are a few shady organizations that provide "fund raising services" for non-profits that suck a substantial portion of the proceeds, but the defrauded contributors are making their donation to the charity not directly to the for-profit (the charity just pays through the nose for the arranged contributions).

 

[tjulia1]

Thank you singledad and flyingron! Sorry, forgot to mention that this is in Illinois. For tax deduction purposes, then I suppose it would be better for those who are donating to pay directly to that school or other non-profit. However, could I still be able to collect the donation through the LLC's website, but payment is linked directly to one of their accounts? After this time, the non-profit could pay a pre-agreed upon fee back to the LLC. Anything amiss about this plan, as long as the proper disclaimers appear when they are submitting payment?

 

[FlyingRon]

Thank you singledad and flyingron! Sorry, forgot to mention that this is in Illinois. For tax deduction purposes, then I suppose it would be better for those who are donating to pay directly to that school or other non-profit. However, could I still be able to collect the donation through the LLC's website, but payment is linked directly to one of their accounts? After this time, the non-profit could pay a pre-agreed upon fee back to the LLC. Anything amiss about this plan, as long as the proper disclaimers appear when they are submitting payment?

They must pay the non-profit or it is NOT deductible. Yes you can arrange for payments, but the money must flow to the non-profit. For example, my non-profit uses a couple of payment processors including PayPal and Amazon. It's our account a these places but it allows a donation to our 501(c)(3) to be tax deductible.

 

[tjulia1]

Great - much clearer to me now! Thanks for the quick response and advice!