Questions about Charities

Q:    I constantly receive requests for money from various charities?  How can I make sure a charity is legitimate before I donate?

A:    You can check to see if the charity has tax exempt status on the IRS website at https://www.irs.gov/charities-non-profits/tax-exempt-organization-search.  The IRS changed reporting requirements for charities several years ago, and as a result many charities unknowingly lost their tax exempt status.  Most have been able to correct this, but if a charity has not corrected it, you cannot take a tax deduction for donations to that charity.

    You can research charities at www.charitynavigator.org and www.guidestar.org.  These websites provide detailed information on the charity's finances.  Charity Navigator rates each charity on financial performance and accountability and transparency.

    It is best to not donate to a charity that calls you on the phone.  If the charity is appealing to you, ask the caller to send you written information.  Many fraudulent organizations choose a name that is very similar to a legitimate charity, and it is always wise to verify the organization.

    If the charity is local, you can visit the charity and let them tell you about their work in person.  Most of them are happy to do so.

Q:    I have been asked to serve on the board of directors for a local charity.  What should I consider before agreeing to serve?

A:    Serving on the board of directors of a charitable organization can be a very satisfying experience, however, it does involve potential risk, so you should think carefully before accepting the position.

    Some charitable boards are advisory boards.  These boards essentially give recommendations to the actual board of directors which makes all of the decisions.  The risk of serving on an advisory board is minimal since it cannot make or implement decisions itself.

    Other boards are governing boards which actually control the organization.  In that case, a board member has potential risk for actions of the organization.  Before agreeing to serve, you should research several things, including (i) whether or not the organization has been subject to investigation or liability by law enforcement, the IRS or anyone else in the past, (ii) whether or not the organization is audited by an independent auditor, (iii) if the organization has a code of ethics, (iv) who the other members of the board are and whether any of them has engaged in questionable conduct, and (v) if the organization provides directors' insurance in the event the members of the board are sued.

    If you agree to serve, you should attend all meetings if possible, maintain your independence and guard against conflicts between your personal interests and those of the organization, and keep copies of all board minutes and agendas, which identify attendees of meetings and topics discussed.  If a matter is beyond the board's level of experience, you should encourage the board to hire and rely on qualified experts, and you should keep all information provided by outside advisors.

Q:    I have heard I can donate to charity from my IRA.  Is that true?

A:    Yes, under certain circumstances.  Qualified charitable distributions" ("QCD") were created under the law in 2006 but were not permanent at that time.  The were extended several times and finally made permanent in 2015.

    To make a QCD, you must be at least 70½ years old.  The QCD must be made directly from your IRA (individual retirement account) to the charitable organization, and QCDs for the year cannot exceed $100,000.  The benefit of a QCD is that you are not taxed on the distribution (and do not take a charitable deduction for it).  Therefore your adjusted gross income is lower and your charitable income tax deduction is not subject to certain limitations.  The QCD also qualifies as your required minimum distribution for the year.

This article is for informational and educational purposes only and does not constitute legal advice.