Starting and Managing a Nonprofit Organization: A Legal Guide

By Bruce R. Hopkins | Go to book overview

CHAPTER ELEVEN
Charitable Giving Rules

The basic concept of the federal income tax deduction for a charitable contribution is this: Corporate taxpayers and individual taxpayers who itemize their deductions (for individuals, those who file a “long form”) can deduct on their annual tax return, within certain limits, an amount equivalent to the amount contributed or to the value of a contribution to a qualified donee. A charitable contribution for income tax purposes is a gift to or for the use of one or more qualified donees.

Deductions for charitable gifts are also allowed under the federal gift tax and estate tax laws. Donors and the charitable organizations they support commonly expect gifts to be in the form of outright transfers of money or, frequently, property. For both parties (the donor and the donee), a gift is usually a unilateral transaction, in a financial sense: the donor parts with the contribution and the charity acquires it. The advantages to the donor are confined to the resulting charitable deduction and the gratification derived from making the gift.

Another type of charitable giving, referred to as planned giving, provides far greater financial and tax advantages to the donor. This type of giving is discussed in Chapter 19.


TYPES OF CHARITABLE GIVING

There are three categories of charitable giving: impulse giving, interest giving, and integrated giving. Each provides some form of emotional or financial satisfaction to the donor.


(a) Impulse Giving

Impulse giving is just that—the donor is responding on impulse to an appeal for a charitable gift. The gift is made in immediate response to a compelling plea (for example, children ravaged by war, hunger, or disease; suffering animals; or an impending cure for a deadly disease). A direct-mail, television, radio, telephone, Internet, door-to-door, or street-corner solicitation usually invites the response.

An impulse gift almost always is made in cash and usually is a relatively small amount. The donor may not have donated previously to the organization, probably does not intend to become involved with the organization’s programs or administration, and has likely not thought about any subsequent gifts. The gift may have been prompted by the receipt of a premium (a magazine, a discount, or a token gift) and an accompanying appeal letter or other literature. Many impulse gifts are not particularly important as charitable contribution deductions because of the amounts

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