It's 10 o'clock - Do You Know Where Your Charitable Donation Is?
The Attorney General provides Consumer Alerts to inform the public of unfair, misleading or deceptive business practices, and to provide information and guidance on other issues of concern.
IT'S 10 O'CLOCK - DO YOU KNOW WHERE YOUR CHARITABLE DONATION IS?
The truck just came and picked up your old, but working, washing machine and dryer, 6 bags of clothes and that old treadmill you used the first week of January 1996. You think to yourself, "It will be one more tax deduction and, even better, the appliances and clothing will be provided to some needy person who needs emergency assistance so they can "make ends meet." Most people who donate clothing to charities assume that the clothing will be given away to needy people or, at least, sold at low cost in thrift stores operated by the charity, with the benefit going directly to the charity.
That is sometimes true, but in many other cases, the charity contracts with a professional fund raiser who solicits and picks up the donated items. The items are then sold to a for profit retail thrift store where they are sold for as much as the market will bear. In some cases, the charity receives a set amount of 50¢ or 60¢ per contribution, regardless of how much is picked up. It wouldn't matter if you left a bag of clothes, or a house full of furniture, the charity would receive 60¢.
In other cases, a charity may enter into a contract with a fund raiser and give permission to use their name, in return for a set payment to the charity. Again, in these arrangements the charity does not receive the direct benefit of the donation.
Who Cares? The IRS, that's who.
You may not care that your donation is providing only minimal benefit to a charity; maybe your main purpose is to get rid of unwanted stuff and know that it will be recycled for someone else's use. But, is the contribution tax deductible as a charitable contribution? The Internal Revenue Service in vehicle donation questions has taken the position that, in order to claim a deduction, the donated goods must benefit the charity. Even if you get a receipt with the charity's name on it, if the value of the donated items is not connected to the benefit received by the charity, then it may not be deductible. Once you know the facts, contact your own tax advisor for advice on what is a valid deduction.
Protect yourself -- ask questions.
Before donating, call the charity and the Attorney General's Charitable Trust Section to ask questions. If the donation is going to a religious organization, it may be exempt from oversight by the Attorney General; in those cases, you should be sure to contact the charity directly, not their fund raiser or the manager of the thrift store.
- If the donations are to be picked up, who will provide that service, the charity or a company under contract with the charity?
- Will the items be given to needy people or sold?
- If the goods are to be taken to a thrift store or if you are dropping your donation off at a thrift store, who owns and operates the store?
- In all cases, you should ask how much the contribution will benefit the charity. It is not unreasonable to ask for verification of the benefit either by seeing a copy of the contract or an accounting of how much the charity received the past fiscal year. If the solicitation program is being operated by a non charitable company, they probably need to be licensed by the Attorney General as professional fund raisers and copies of the contracts are on file with the Charitable Trust Section.