As the year-end donor season approaches, we want to remind you that the donor is required to pay for an appraisal for any property, real or personal, for which the donor wants to take a deduction of $5,000 or more.
We often see agreements between a donor and non-profit organization whereby the non-profit agrees to pay for a qualified appraisal of the property to be donated. IRS rules does not permit this, notwithstanding the terms of any such agreement. More specifically, the donor is required to file Form 8283 with her tax return to take a charitable deduction for donated property, which requires her to get a qualified appraisal of real and personal property. Not all donations require an appraisal, such as cash or marketable securities. But where an appraisal is required, it is up to the donor to obtain and pay for it.
We receive many calls from people thinking about starting a nonprofit organization to help solve a particular problem or address a particular issue. The idea is that a nonprofit will allow people to raise money to fund a defined need. Sometimes, though, the very real problem or issue to be addressed isn’t one that can be funded with a charitable organization. For example:
- Something that will benefit a single individual, like a wheelchair ramp to provide easy access to the individual’s home, or
- Expenses that are someone’s personal or parental obligation, like fees for sports or other extracurricular activities.
When considering the need for a new nonprofit organization, keep in mind that the charitable purpose must be broad and the organization’s work must benefit a whole community, not just the members of the nonprofit or a specific individual.
Did the title of this post catch your attention? Yes, the IRS really can be helpful to nonprofits with many commonly asked compliance questions. The IRS publishes tons of material each year, much of it very technical and very much geared toward tax professionals. But they also publish some very clearly written, plain language documents that can help us as nonprofit board members and staff leaders. These documents are referred to as IRS Publications (as opposed to Forms, Technical Advice Memoranda, Opinions, etc.), and are easily accessible by searching the IRS website. You can enter the publication number if you know it, or just search by keywords.
Some of the most common issues and questions for charitable organizations are addressed by the following:
- Publication 526, for rules regarding charitable contributions.
- Publication 557, for information on how to obtain and keep your tax exempt status.
- Publication 1771, for rules on receipts and acknowledgements of gifts and contributions.