TYPES OF CHARITIES, DEDUCTIONS and OTHER COMMENTARY
This takes on more significance than simply just a difference in the tax issues and will be explored below. In any case, as stated, the real aspect to review is which charity will give the most tax benefits and are known as a 50% charity or a 30% charity. A 50% charity normally includes churches, public charities, educational institutions, hospitals, governmental units, organizations receiving substantial support from governmental units or the general public and certain private foundations more fully described in IRC 170(6)(1)(D). The 30% charities include other organizations (Primarily private foundations) as identified in IRC 170(C) and which do not qualify as a 50% charity and can include veterans' organizations, fraternal societies, nonprofit cemeteries, etc.
What's the real point? Money!! If one gifts to a 50% charity, any tax deductions are limited to 50% of the donor's adjusted gross income with a 5 year carryover. Gifts to a 30% charity are limited to 30% of a donor's adjusted gross income with a 5 year carryover. There are further differences depending on the type of property gifted (Ordinary income, long term capital gain property, tangible personal property, etc.), if the gift comes from an individual or corporate donor, etc. So be sure and review all tax deductible aspects in detail IF that is of concern.
In context with the type of charity, it is necessary to explore one other item impacting a gift decision. Who pays for the documents??? With almost all of the major charities, the documentation is provided at no cost. However, if you wish to use a small 30% charity, recognize that there may not be an attorney on staff to prepare the detailed documentation. Some donors have ended up paying several thousand dollars for a attorney's "education" in learning to how to draft such an agreement. This is usually neither worth the money nor the aggravation- particularly since the IRS could contest the deductions for an improperly structured gift and the subsequent annuity.
BAD CHARITIES: (1999) From author Kathleen Kelly of "Effective Fundraising Management" comes this list of charities you NEVER want to deal with since about 90% of the monies raised goes to fees and expenses.
American Institute for Cancer Research-Washington D.C.; Cancer Fund of
America-Knoxville TN; National Children's Cancer Society-St. Louis MO; Pacific
West Cancer Fund-Seattle WA; Cancer Center for Detection and Prevention;
Project Cure-Dallas TX; The Alzheimers Disease Fund; Center for Advanced
Heart Research; Center for Alternative Cancer Research; United Children's
Fund-Knoxville TN; A Child's Wish; Walker Cancer Research Institute-Aberdeen,
MD and The National Cancer Research Center.
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