The people of United States are extremely charitable, especially during the holidays or upon the occurrence of natural disasters. Unfortunately, scammers and fraudsters prey upon people that are charitably inclined. If your charitable contribution is tax motivated, it is your responsibility to make sure the charitable contribution meets the requirements of the Internal Revenue Code for deductibility.
Internal Revenue Code (“IRC”) Section 170(c) lists the five types of organizations to which a contribution or gift may be made for purposes of obtaining a deduction for a charitable contribution. The most common organization is the one described in IRC Section 170(c)(2)(B), which is a “corporation, trust, or community chest, fund or foundation …organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals…” However, the requirements do not stop there. Subject to specific exceptions, the organization must also be recognized as a tax-exempt organization pursuant to Internal Revenue Code Section 501.
To check to make sure an organization is a legitimate charitable organization and your contributions to it will be tax deductible, there are a couple simple ways to check. The best way to check is to look online at the IRS’ website and search for “EO Select Check.” This search will take you to a webpage that asks you to enter the name of the tax exempt organization and where it is registered. The website will then check its database to determine if the organization has received its tax exemption and what type of contributions to it are tax deductible.
Additionally, you can check the California Secretary of State website under business entities and search for the name of the entity. It should come up as a mutual benefit corporation or a public benefit corporation. However, still cross-check it with the IRS database.
Further still, you can search the California Attorney General Registry of Charitable Trusts to see if the charitable organization is registered there. Again, cross-check it against the IRS database.
If you are not sure a charitable organization is legitimate, there are various signs that normally signify that the organization is not legitimate. For example, a scammer will usually refuse to provide detailed information about the organization’s identity, mission, costs, and how the donation will be used; will not provide proof that the contribution is tax deductible; uses a name that closely resembles that of a more well known, reputable organization; uses high-pressure tactics such as trying to get you to donate immediately, without giving you time to think about it or conduct any research; asks for donations in cash or asks you to wire the money; or offers to send a courier or overnight delivery service to collect the donation immediately.
If and when you decide to search the IRS, California Secretary of State, and the California Attorney General Registry of Charitable Trusts to verify the legitimacy of the charity, you should request information about the charity such as its name, address, and telephone number. You can also run a search on the internet with the name of the charity with additional search terms such as “scam” or “complaints”. You can also contact the charity directly if the solicitor will provide the phone number.
The amount of research to be done before making a charitable contribution is up to you and will likely be influenced by the amount of the contribution you are making. The larger the donation, the more research you should do to make sure the organization is legitimate and that you will be entitled to the charitable tax deduction you are expecting. Although you could still possibly receive a tax deduction for a theft loss if you are defrauded into making a donation to an illegitimate organization, that will not remedy the fact that what you thought was money going to a good cause was actually money stolen from you. There are many good and reputable charitable organizations in our community. Do not let yourself fall prey to a scam. Be careful out there.