Ask not what your country can do for you, ask what you can do for your country. – John F. Kennedy

What exactly is a 501c3 organization?

This is IRS code for a properly registered and functioning charitable organization here in the United States of America.  You can look up most IRS qualifying charities with their Exempt Organizations Select tool.  “Most” is as close as you can get because a) the list is ever-changing, b) not all churches are registered because they are automatically tax exempt, and c) governmental units don’t have to register.

Real charities issue receipts, or acknowledgement letters, often disguised as mushy thank you notes.  The letter needs to specifically state the value of your charitable donation.  It needs to state something like “no goods or services were received in exchange for the donation.”  If possible, it will also state that the organization is a 501c3 organization.  Oh – and it has to have a date, and be issued before the taxes are due.

Be careful what you write in the memo section of your check.  “Mission trip” is okay; “for Susan’s account in the mission trip” is not okay because it exercises undue control, and essentially becomes a gift for Susan.

One further complication is that for donations of $250 or more, each specific donation needs to be listed on the letter.  Ten $50 checks on different dates can be lumped together as $500 at year end, but two $250 checks each need to be stated separately.  Yes, I expect smaller charities, such as local churches, turn themselves inside out trying to keep up with these rules.

If you received a thank you gift (such as a round of golf or a CD), the value of the thank you gift has to be subtracted from your donation.  Some organizations state the total amount given, the value of the thank you gift, and the net charitable donation.  This makes it crystal clear!

So:  A few questions answered…

  • Cash in the plate on Sunday? Forget it!  The rules state that you need a 3rd party written record.  Your cancelled checks will suffice, as long as they are not $250 or more (see above).  If you must use cash, you had better put it in an envelope with your name, address, etc., so that the office can provide the letter.
  • Helping your niece with college expenses? No:  this is a personal gift, not a charitable donation.
  • Giving $50 to an old friend, down on his luck? No:  this is a personal gift, not a charitable donation.
  • How about $5 to every panhandler you pass on your way into the city?  (Need I explain?)
  • Maybe all the 50/50 tickets where you didn’t win? Sorry, now you’re into a new topic.

Finally, remember that you can’t take a deduction if you give money to organizations in other countries:  your local NJ church counts, but the church where you grew up back in the motherland won’t.  Also, you can’t take a deduction if you give money to lobbyists (such as Political Action Committees) because by definition, you are buying something (political favor) if you give money to a lobbying organization.

Phew!  Let’s wrap this up with some food for thought…

We have the right as individuals to give away as much of our own money as we please in charity; but as members of Congress we have no right to appropriate a dollar of the public money. – Davy Crockett, US Congressman and King of the Wild Frontier

Better the occasional faults of a government that lives in a spirit of charity than the consistent omissions of a government frozen in the ice of its own indifference. – Franklin D. Roosevelt