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May (c)(3) member claim deduction for unused services?

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May (c)(3) member claim deduction for unused services?

I have made a contribution to a 501(c)(3) nonprofit organization that qualifies me as a member to receive volunteer services they provide (taking members on shopping trips, doctor visits, etc.). If I do not receive any services from the organization throughout the tax year, am I able to claim a charitable contribution deduction for my payment?

Probably not.  If you are referring to the organization I think you are, it charges $600 a year for membership and provides access to variety of services for its members, including transportation for shopping, medical appointments or cultural activities, help with in-home needs like repairs or computer assistance, member-defined support groups, discounts on home care workers, and a variety of social and cultural activities that are generally available to the public, usually free.  It also offers social memberships for around $200 than are specifically advertised as tax deductible but offer only the benefits that are generally open to the public, not the transportation, in-home support or other services available only to members.

The general rule for deductibility for “quid pro quo” payments, i.e. those that provide goods or services in return, is that you can deduct only the excess of what you paid over the value of the goods or services to which you are entitled to receive in return.  And where you pay more than $75 for the goods or services, the charity is required to notify you of the value of the goods or services to which you are entitled so that you can determine the amount that is deductible.  (See Ready Reference Page:  “Charities Must Set Value on ‘Quid Pro Quo’ Gifts”) This organization’s literature does not mention a deductible amount of the $600 membership fee, and I doubt that you got the notice that would be required if the organization considered any part of the payment as a contribution.

The only way to claim a full deduction for a quid pro quo payment is to disclaim the right to the goods or services in advance of the time you can use them.  Since you could have used any of the services during the year, you can’t claim a deduction just because you did not.  (Donor/patrons of the annual fundraising dinner can claim a full deduction if they tell the charity in advance that they will not be using the tickets, but not if they decide the night of the event it is too cold or rainy to attend.)  The key is that you had the right to use the services any time you wanted during the year and when you had that right, the IRS takes the position that you received the full benefit, whether or not you actually did.

Tuesday, September 9, 2014

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