Monday, July 30, 2012

Investing in Our Community in Tough Economic Times

By Kate Henry, Board Member, Gay Central Valley
And Former Executive Director of the Fresno Nonprofit Advancement Council

Giving to community organizations is so important in any economic climate, but even more critical when money is tight. As we all work harder for our paychecks, and are just grateful for a job at all, we must spend our dollars wisely.  So it is for our donations to charitable organizations. It is so confusing, sorting out which nonprofit should we give those valuable dollars to and concerns about how they will use the money. Beyond the availability of a tax deduction for the donor, is the concern of who will decide how the money is spent.  Tax-exempt nonprofits are governed by a community board of directors and must report activities to the State of California and The IRS.

Gay Central Valley encourages everyone to make charitable contributions to tax-exempt, nonprofit organizations doing good work for our community. In addition to Gay Central Valley, other organizations who are 501 (c) 3 and nonprofit are Community Link, Inc., Trans-E-Motion, United Student Pride (through California State University, Fresno), and several others in the Central Valley.

Not sure if the organization you want to donate to is a tax exempt nonprofit? You can look up the organization by name or by EIN # on the IRS's Exempt Organizations webpage.  (Search tip: put in the name of the organization, then click on search, then click on the triangle next to the name heading to sort the list alphabetically.) Or you can request (from the organization) their IRS letter, which is given to all tax exempt organizations.

Important terms you need to know:

Tax-Exempt- a term used by the IRS for approved charitable organizations that are not required to pay income tax on most of their income or donations. Groups who desire to have this status must apply to the IRS and be approved, follow certain rules, including forming a board and filing income information each year (form 990). Most familiar are the 501 tax code designations, including the 501 (c) 3 designations of most official community benefit organizations.

Nonprofit- A specific type of corporation, in California a nonprofit is required to register and report activities to the State Attorney General and the Secretary of State. The organization is owned by the public and held in trust by the Board of Directors. They may or may not be tax-exempt and donations deductable, depending on if they have applied for and been granted federal tax-exempt status.

For Profit- a specific type of business set up for the purpose of making a profit, sometimes a corporation, and governed by both state and federal law. For profit businesses are required to pay income tax, therefore are not exempt from taxes. They may be owned and decisions made by a single person or by a board, depending on the way the business was set up.

“Not for Profit”- a layman’s term, not a legal status with the federal government or the State of California, sometimes used to refer to an informal group of people or a single person who does work in the community. Because this is not a legal business status, there is no law governing the oversight of income, activities or reporting. Donations are legally viewed as gifts to an individual, and reportable as individual income for tax purposes.

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