Who is responsible for fraud in a Non Profit Organization?

Personal Deductions Allowed for Contributions to a Non Profit Organization

• For a non profit organization, people who contribute to the organization are able to take that contribution as a deduction. However, my question relates to the deductions allowed given that a person purchased a product or service from the organization. An example of what I am talking about is when I purchased show tickets from a non profit organization. I paid $70 for the tickets even though the face value of the tickets were $40. I was then able to legally take a personal deduction of $30. Given that these tickets had a very clear face value, it was easy to figure out how much additional was tacked onto the price and how much my deduction would be. My question is basically for someone to illustrate this policy out to me. Where does the corporation code mention this policy for California based non profits? More specifically, I am interested in the policies that allow deductions to take place based off of a product sold as well as a service performed. A tangible example is if the organization hires a person to perform personal finance consulting to an individual. The organization pays this employee $30.00 an hour to do this job. However, the customer pays $60.00 an hour for the service rendered. Of course the non profit orgnanization takes an amount of the remaining $30.00 an hour to cover overhead and other administrative expenses, but how much will the customer be able to deduct? I hope to tip another $20 for an answer that is clear and understandeable in plain english.

• Answer:

  brian... The California Corporation Codes for a variety of non-profit corporation types can be found on this page: http://www.leginfo.ca.gov/cgi-bin/calawquery?codesection=corp&codebody=&hits=20 Donations are not mentioned in any of the major headings. Browsing the codes under various headings that might seem pertinent produces no results, nor does a Google search of the entire site discover any mention of donations under the relevant sections of the site: donations site:www.leginfo.ca.gov ://www.google.com/search?q=donations+site%3Awww.leginfo.ca.gov For this reason, I was inclined to believe that the statutes you seek are not regulated by, or found within, the California Corporation Codes, but would be regulated only by the US tax code. This turned out to be the case. In searching on the IRS site, I discovered that the type of donation you're referring to is called a 'quid pro quo contribution' and is explained quite thoroughly on the following page from the IRS site: "Charitable Contributions - Quid Pro Quo Contributions This is a payment a donor makes to a charity partly as a contribution and partly for goods or services. For example, if a donor gives a charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. In this example, the charitable contribution part of the payment is $60. Even though the deductible part of the payment is not more than $75, a disclosure statement (below) must be filed because the donor's payment (quid pro quo contribution) is more than $75. Failure to make the required disclosure may result in a penalty (below) to the organization." http://www.irs.gov/charities/charitable/article/0,,id=123201,00.html As for the proper amount for the customer to deduct for a service performed by the company, this is covered under the topic of 'Good Faith Estimate of Fair Market Value': "An organization may use any reasonable method to estimate the fair market value (FMV) of goods or services it provided to a donor, as long as it applies the method in good faith. The organization may estimate the FMV of goods or services that generally are not commercially available by using the FMV of similar or comparable goods or services. Goods or services may be similar or comparable even if they do not have the unique qualities of the goods or services being valued. Example 1. A charity provides a one-hour tennis lesson with a tennis professional for the first $500 payment it receives. The tennis professional provides one-hour lessons on a commercial basis for $100. A good faith estimate of the lesson's FMV is $100." More examples on the page: http://www.irs.gov/charities/charitable/article/0,,id=123201,00.html So if the FMV of the tennis lesson is $100, the donor can claim the remaining $400 as a donation. Other pertinent parameters are discussed on the page. In the tangible example you cited, involving the donation of financial consulting, since the payment which includes the donation will amount to less than $75, a Disclosure Statement is not required to be given to the donor. The donor, of course, is entitled to ask for the Fair Market Value of the service being performed, and to claim the difference as a deduction. Everything the IRS has to say on the topic can be found in the 31 unique results found on this Google search of the IRS website: "quid pro quo contribution" site:www.irs.gov ://www.google.com/search?q=%22quid+pro+quo+contribution%22+site%3Awww.irs.gov I hope that's clear and understandable! sublime1-ga Additional information may be found from an exploration of the links resulting from the Google searches outlined below. Searches done, via Google: california corporations code ://www.google.com/search?q=california+corporations+code donations site:www.leginfo.ca.gov ://www.google.com/search?q=donations+site%3Awww.leginfo.ca.gov fee donations site:www.irs.gov ://www.google.com/search?q=fee+donations+site%3Awww.irs.gov "quid pro quo contribution" site:www.irs.gov ://www.google.com/search?q=%22quid+pro+quo+contribution%22+site%3Awww.irs.gov