FAQ
Julianne Shenk
JBS Nonprofit Consulting
April 22, 2016
April, as you can imagine, is a busy month…and totally got
away from me in the “you need to write your monthly blog” department. One of the things that made me so busy was
answering questions. Then it hit me: You
got your blog topic! I compiled a list
of the most asked questions that I received this year.
And…don’t think I only answer questions in April! Ask me
year round!
Q: I wrote a check to Charity XYZ on the 1st of
January this year. It was intended for December 2015, but I just got too busy
and sent it late. Can I claim it on 2015 taxes?
A: No. Your check was dated 1 January 2016, it can be
claimed on your 2016 taxes. Intent does not trump legalities and tax code.
Q: How do I choose which nonprofit to support/donate to?
A: Evaluate what interests you. Are you looking to support a
specific cause or condition/disease in need of funding? Narrow down what is
important to you. You are giving your hard earned money to a group that you
should feel a connection to.
Q: How do I know if a charity is legitimate?
A: Research. Research. Research. I can do this for you. It
is what I get paid to do. But, you can do it too. Visit the website. Poke
around, follow the links, and ask questions. Also, any reputable nonprofit
exercises transparency and can provide you with their financial data. Yes, some
organizations make it a little difficult to get this information, but again, I
can help you with that. It should be researchable to everyone, but if it is
not, contact them and ask. If they are less than forthcoming with your request,
I think it best to move on to another organization.
Q: I am not in a position financially to donate money at
this time, is volunteering considered donating? Does my time count?
A: Yes. If you read some of my other posts, many espouse my
belief that volunteering is the backbone, the heart and soul, the lifeblood, of
a nonprofit organization. Giving of your
time is as important, if not MORE, important, than giving money. If your desire
is to help a cause, but you are not in the financial situation to do so, please
consider donating your time. Be hands on, it is one of the most rewarding acts
you can perform. It will also allow you to become involved and educated in a
cause that is important to you.
Q: How do I know where my money is going?
A: You can indicate intent for your donation to be spent in
a particular way. This is called a “restricted gift”. To donate in this manner,
establish (in partnership with the organization) where you would like to direct
the funds to guarantee that it is possible for the funds to be directed in the
manner you wish. In grad school I had a case study regarding restricted gifts.
A family designated a large donation be given to a local animal shelter, but
restricted the breed of animal that the funds could be used to help. The
patriarch of the family had an affinity for a particular breed of dog. They
were insistent that funds only be used to save, place, and maintain this
specific breed. The shelter’s hands were tied, as the breed mentioned in the
restricted gift letter was rare and literally never seen at the shelter. The
gift sat for years before a family member finally relented and changed the
restrictions to cover all breeds. Be sure that your gift, if restricted, is not
so restricting as to prohibit use.
The most useful donation is an “unrestricted donation”. This
allows the agency to allocate the funds to the area in most need. Do not
hesitate to reach out to the nonprofit before making a donation to ask how you
can direct your donation to make the most impact. They are more than happy to
advise you.
Q: I want a tax number; can I get one by forming a
nonprofit?
A: No. This is my
single biggest pet peeve regarding the nonprofit industry. I often find (75% of
my personal experience, that is a high number!) folks are looking to get a tax
number to avoid paying sales tax. A nonprofit is formed to serve a need in the
community that receives a tax relief to better aid them to help/promote/execute/support
their cause. If your coffee group wants to purchase coats to handout to the
homeless/underprivileged in the winter, you cannot get a tax number to save on
sales tax. If you are a registered 501 (c) (3) that is purchasing coats to hand
out, you can apply for a tax number (one time filing and free). You cannot get a tax number to buy goods to
donate to a food pantry. The food pantry can get a tax number to purchase
staples to supply its coffers. If you are legal and registered AND approved by
the IRS as a recognized 501 (c) (3), you are required to get a tax number. That
is the only way.
Q: What is the difference between a nonprofit organization
and a not-for-profit organization?
A: There is no legal distinction. The terms are used
interchangeably.
Q: I recently learned that a charity that I contributed to
in years past has shuttered. Do the people on the board get to keep the monies
collected?
A: No. Most nonprofits “go out of business” when their
funding dries up. If there happen to be funds left, the IRS has very specific
rules as to where the assets/funds go:
Assets of an organization must
be permanently DEDICATED to an exempt purpose. This means that should an
organization dissolve, its assets must be DISTRIBUTED for an exempt purpose
described in this chapter, or to the federal government or to a state or local
government for a public purpose. If the assets could be distributed to members
or private individuals or for any other purpose, the organizational test [for
exempt status] is not met.[1]
The assets must go to another nonprofit organization or
exempt organization type.
Q: Who should I contact if I have concerns about the
integrity or practices of a particular nonprofit organization?
A: At the state level, contact your state’s charity/nonprofit
office. This is typically a branch of the Office of the Attorney General or the
Secretary of State. (You can find your local contact via http://www.nasconet.org). At the federal level, contact the IRS
(http://www.irs.gov).
Those are the most asked questions I get. If you have any
other questions or need some elaboration on a particular question from above,
just ask!
