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May charity demand employee contribution?

Your Legal Questions Answered

May charity demand employee contribution?

I work for a 501(c)(3) nonprofit organization. This nonprofit mandates that employees give to the annual campaign but gives incentives if you hit your goal. The incentive is extra hours of paid vacation. It seems like 'goods and services' and I am questioning its legality.

This is a pretty lousy way to run an organization.

A required payment is not a gift, and to the extent that this group is recording this money as charitable contributions on its Form 990 tax information return, it is filing an improper and misleading return. You are not making a contribution.  You are being required to give back some of your pay for some potential time off. 

As a practical matter, the IRS is not likely to be very interested unless the numbers are so large that it would affect your organization’s public support calculation.  But if your organization has to register for charitable solicitation purposes, your state attorney general might be interested.  It could be the kind of materially misleading information that would generate a response from the AG.

In so far as there may be violations of labor law, it is unlikely that the reduction in pay would bring your compensation below minimum wage, but if the contribution is deducted from your regular wages, it could be a violation of a state wage payment and collection law as an improper deduction.

We had a similar question a few years ago, about a boss who kept score on payroll deduction contributions to a charity of which the boss was a director and suggested that there would be a backlash for employees who failed to contribute.  An employee has very limited recourse in a situation such as this.  I am sure a lot of employees would voluntarily give to the annual campaign.  But coercion and misrepresentation fundamentally undermine the credibility of the organization and the important charitable work that it does. 

Tuesday, July 11, 2017

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