I am a White fundraising executive in a process of uprooting my racism and seeing clearly the system of advantage that has favored me in my career and elsewhere. I have decided to give my services at no charge to a Black-led start-up 501(c)(3). They had offered to hire me at market rate, but I have offered my services as an act of personal reparation. This is a gift of C-suite services the organization would have otherwise purchased — and it is certainly the biggest gift I’ve ever made. What considerations should the nonprofit be aware of in acknowledging this gift? What tax implications should I be aware of in giving it?
While I applaud your willingness to provide pro bono services to the start-up charity, unfortunately there is no economic benefit to you personally. The value of volunteer services, as you know, is not deductible. The charity has no legal requirement to acknowledge your service (although it is clearly best practice to acknowledge and thank an organization’s volunteers). It will be asked for the number of its volunteers on line 6 of the Form 990 if it files the full Form, but it can make an estimate of the number and your service may be indistinguishable from a lot of others in the start-up phase. If the charity files a 990-N or 990-EZ for smaller organizations, there is no designated spot for formal recognition.
As the volunteer, of course, you are not entitled to claim the value of your service, no matter how valuable it may be. A lot of people in your situation consider asking for payment and then returning the amount as a charitable contribution. That is not a good idea, however. Even if you are among the less than 10% of all taxpayers who itemize contributions on their federal income tax return so that they have separate economic value, the gift back may not be a wash transaction in your overall tax situation. It could increase your FICA taxes. If you are in a state like Pennsylvania that has a personal income tax but no charitable deduction, you would be out of pocket for the state tax. You may also be subject to a local tax based on a percentage of income without a charitable deduction, which would also cost you money.
Your greatest benefit may be the personal satisfaction that you have used your abilities to make a difference and have helped make the world a better place. It can be a good feeling.