Can donated equipment be deductible for the donor?
Summary:
Donations are deductible if made to a recognized 501(c)(3) organization, or one that meets the qualifications of such.
Answer:
Someone asked in soc.org.nonprofit:
I am making a documentary film. My production group is a non-profit.
People are willing to give equipment to us in return for a tax
deduction. Is that legal?
Putnam Barber [Mailto: pbarber@eskimo.com] replied:
If you have been recognized as a 501(c)(3) by the Internal Revenue
Service, probably. That's what such recognition is about. If you haven't
been, it's up to the donor to prove (if questioned by the IRS) that you
meet the qualifications -- you must be an organization (donations to
individuals are never deductible per se), and you have to meet the
conditions included in 501(c)(3) for eligibility. Many donors, including
nearly all foundations and corporate community-affairs departments,
require 501(c)(3) status as a condition of making any donation.
Sometimes donors are willing to countenance pass through arrangements
where a recognized 501(c)(3) accepts the gift on behalf of another
organization. In this case, the accepting organization must be sure that
the gift and the act of passing it on to the ultimate recipient are
consistent with its tax-exempt status (i.e., with the purposes and
activities which it declares in its articles of incorporation and
by-laws and which have been accepted as the basis of its organization
and exemption by the relevant state and federal authorities).
In general, it is recommended that if the amounts in question are small,
the donors should forego the tax-deductions unless the situation is
absolutely clear. They could easily spend more in accounting and
attorney expenses than the tax-benefits they would receive. If the
amounts in question are large, then you should probably explore both
obtaining 501(c)(3) status for yourself and creating a formal
pass-through arrangement with a suitable intermediary (an established
film-training school, for example, that is already recognized as a
501(c)(3)). Which option will prove best for you will depend on what
community resources you can call on to smooth the process and develop
the necessary arrangements.
