Charities That Lobby Might Not Be Tax-Exempt: Beware!
By Teresa Ambord
Charities may be legitimate, yet the money you donate may not be tax-deductible. Organizations whose main function is not to serve the public, but to lobby for a particular cause or political position or to elect a candidate may not be allowed to accept tax-deductible donations, even if they say they are.
Giving Money Over the Phone is a Bad Idea
Ask instead to be sent literature about the cause. Most legitimate charities and tax-exempt organizations will do this. Unions sometimes make telephone solicitations, representing themselves as charities, and indeed they may do some level of charity work. But if most of what they do is lobbyist activity, your donations to them may not be tax deductible, even if they assure you that they are. If you are interested in donating to them but want to be sure you can deduct it on your taxes, ask for literature. When the literature arrives, check it carefully for a statement of tax deductibility. If you have literature that states your donation is tax deductible and you subsequently make a donation, keep the literature with your tax information, in case you have to defend the deduction before the IRS.
Law enforcement unions make frequent telephone solicitations, and are successful because most people favor law enforcement. But money sent to a union may, at least in part, support the union administration, not the uniformed officers. Not only are those donations not tax-deductible to you, but you may find that they are used to support political positions that you oppose.
Lobbying
Lobbying has been around for over a century, since the days of Ullyses S. Grant. But in the beginning, donations to lobbyists were tax-deductible. It wasn’t until the 1930s that a court denied tax-exempt status to an organization whose chief activities were the dissemination of materials advocating the repeal of certain laws, rather than activities to help the needy or to advance education or science.
The key-determining factor in whether or not a charity is tax exempt is the amount of lobbying they do. If the lobbying is found to be substantial, they will most likely be deemed non-exempt. If an organization that has tax-exempt status is found to be engaging in substantial lobbying, they could have their tax-exempt status revoked. This revocation would be retroactive to the time the tax-exempt status was issued. Generally, this harsh penalty keeps charities from attempting to lobby, though every election year we hear stories of candidates campaigning from church pulpits. Churches and many other charities fall under the heading of 501(c )3 organizations, which means that they are not permitted to engage in partisan politics, such as promoting a candidate. Some churches have been forced to give up their automatic tax-exempt status as a result, which means that every time the plate is passed, the money collected is taxable to the church, and not tax-deductible to the giver.
If a tax-exempt organization accepts a donation earmarked for lobbying, that donation too, is taxable to the organization and not deductible to the giver.
At one time the rule was fairly simple. If less than five percent of a charity’s volunteer time and effort (and no money) were spent lobbying, they were safe. But soon it was realized that percentages are a poor measure. Now all the facts and circumstances of an organization’s activities must be considered. To the general public, the tax status of a charity can be confusing. If you are in doubt about the donation you are about to give, don’t take a chance. Give.org will check out the charity for you. They are affiliated with the Better Business Bureau and will be able to tell you if the charity is legimate and if your donation will be tax deductible.
