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Chronological Thread  
  • From: Una Smith <una.smith@att.net>
  • To: Mounted search and rescue <msar-riders@lists.ibiblio.org>
  • Subject: Re: [MSAR] Tax Situation for MSAR
  • Date: Wed, 2 May 2007 22:18:29 -0600

[This applies only in the USA, and it is rather long. Delete now
if the topic is of no interest to you.]

Michael R. Schuppenhauer wrote:
>As the tax day came and went. I am still trying to figure out the
>basic principle (line item ???) under which I write off all the
>collected receipts, expenses (& mileage) that I accumulated while
>volunteering for the Sheriff's Office Emergency Services, which
>is not in itself a 501 c 3, i.e. not (yet) incorporated as such.

You can deduct these expenses as charitable contributions only if
you itemize deductions. See IRS Tax Topic 501 and 506 from here:
http://www.irs.gov/taxtopics/tc500.html

AND

You can deduct these expenses as charitable contributions only if
the recipient is a qualified organization. See IRS Tax Topic 506
again: "To be deductible, charitable contributions must be made
to qualified organizations. Qualified organizations include, but
are not limited to, Federal, state, and local governments and
organizations organized and operated only for charitable [...]
purposes [...]" Okay so far. Here is where many SAR responders
get confused: "Organizations can tell you if they are qualified
and if donations to them are deductible." In my experience, many
SAR organizations cannot tell you this. They *are* qualified
organizations, but their officers don't know that they are. If
the organization meets the organizational critera outlined on IRS
Form 1023, Application for Recognition of Exemption Under Section
501(c)(3) of the Internal Revenue Code, AND its income is normally
under $5000 per year, you can act as if the organization is a
recognized 501(c)(3) even if the organization has never filed IRS
Form 1023. See Instructions for Form 1023:

http://www.irs.gov/instructions/i1023/index.html

Relevant text:

>Overview of Section 501(c)(3) Organizations
>
>Who Is Eligible for Section 501(c)(3) Status?
>
>Organizations organized and operated exclusively for [...] charitable
>purposes [...] are eligible to file Form 1023 to obtain recognition
>of exemption from federal income tax under section 501(c)(3) of the
>Internal Revenue Code.
>
>Form 1023 not necessary. The following types of organizations may
>be considered tax exempt under section 501(c)(3) even if they do not
>file Form 1023.
>[...]
>
>Any organization that has gross receipts in each taxable year of
>normally not more than $5,000.
>
>Even though the above organizations are not required to file Form
>1023 to be tax exempt, these organizations may choose to file Form
>1023 in order to receive a determination letter that recognizes
>their section 501(c)(3) status and specifies whether contributions
>to them are tax deductible.

Okay so far? The very next section of the intructions addresses
the "organized and operated" requirements. Some SAR units,
especially MSAR units that are Sheriff's Posse groups, may fail
to meet those requirements. (In which case, your contributions
are not deductible.)

>Qualification of a Section 501(c)(3) Organization
>
>There are two key requirements for an organization to be exempt
>from federal income tax under section 501(c)(3). A 501(c)(3)
>organization must be organized and operated exclusively for one
>or more exempt purposes.
>
>Organized. An organization must be organized as a corporation
>(including a limited liability company), trust, or unincorporated
>association. The organizing document (articles of incorporation
>if you are a corporation, articles of organization if you are a
>limited liability company, articles of association or constitution
>if you are an association, or trust agreement or declaration of
>trust if you are a trust) must limit the organization's purpose(s)
>and permanently dedicate its assets to exempt purposes.
>
>Operated. An organization must be operated to further one or
>more of the exempt purposes stated in its organizing document.
>Certain other activities are prohibited or restricted, including,
>but not limited to, the following activities. A 501(c)(3)
>organization must:
>
>a. Absolutely refrain from participating in the political
>campaigns of candidates for local, state, or federal office.

In many counties the sheriff is elected to office, and a Sheriff's
Posse group may be expected or required to support their sheriff's
campaign for re-election.

>c. Not further non-exempt purposes (such as purposes that benefit
>private interests) more than insubstantially.

Sheriff's Posse groups that operate a boarding stable or riding
facility for its members' personal use may be regarded as having
substantial non-exempt purposes.

>d. Not operate for the primary purpose of conducting a trade or
>business that is not related to its exempt purpose(s).

Here the organizing document is all-important, because it defines
the exempt purpose. If the defined exempt purpose is SAR and ony
SAR, but the unit primarily does non-SAR things like distributing
presents to needy kids at Christmas, then there is a problem.
The solution is to either stop the unrelated activities or change
the organizing document.


Is that enough?

Una Smith
New Mexico




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