I want to make a donation to a 501(c)(3) organization that has 11 separate chapters and want to earmark my $2,000 donation to a specific chapter to help that chapter grow. If I clearly earmark this money for the specific chapter, do they have to make sure that all the money goes to that chapter? Also, if I earmark it to a specific person in the chapter will it be deductible?
Your earmarking your gift to a specific chapter within the organization raises the conundrum of all earmarked gifts. Not only are you concerned that the money gets there, but you are also concerned that the money is “additional” to what would otherwise be available to the chapter?
Yes, the organization must give it to the earmarked chapter, although it is not always clear how you can enforce that requirement if you don’t retain the right in a gift agreement and even if you do, you really can’t afford to sue over $2000. The state Attorney General would have standing to enforce the restriction but may not be interested in getting into a fight about it.
If the parent organization is supporting the chapter in other ways, you may want to add a condition that your gift must be transferred over and above what would otherwise be given to the chapter. If the chapter has a separate exempt status (from inclusion in a group exemption letter or a separate recognition), you may want to make the gift directly to the chapter to reduce the likelihood that the parent will apply an offset. You will probably want to make clear to the parent organization that this gift is to be “extra” money for the chapter and if it isn’t treated as such, they won’t get anything from you again. If the organization wants to keep the possibility of additional contributions, it will probably honor your request.
If you earmark your gift for the benefit of a particular individual within the chapter, even if the parent organization is willing to take it, it will not be deductible. The IRS does not consider a taxpayer’s gift to a specific individual, no matter how deserving, to be charitable. You have to give to a (c)(3) organization for its use.
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