garfield Posted September 12, 2011 Share Posted September 12, 2011 Giving to pay a member's dues is not tax-deductible because it's not a donation; the member directly benefits from that money. This discussion comes up on a semi-annual basis when members come looking for sponsorships and some have been erroneously informed that they can tell would-be sponsors "It's tax-deductible!" as an incentive. Giving to a MM directly is not deductible, but giving directly to the corps for the benefit of the marcher is deductible. The MM is volunteering for the corps and, again, where's the financial benefit to the MM of marching in corps? (Disclaimer: Don't believe anything I say. See your tax advisor.) Link to comment Share on other sites More sharing options...
Dave Posted September 12, 2011 Share Posted September 12, 2011 Yeah...that's not true. Link to comment Share on other sites More sharing options...
garfield Posted September 12, 2011 Share Posted September 12, 2011 Yeah...that's not true. OK, whatever you say, Dave. But anyone who's been involved in tax issues recognizes that it's gray, not black and white. I just spoke with my CPA and he said that, in front of a tax judge, he'd argue that the only benefit that the corps is providing the MM is food and shelter. I've witnessed a top-5 corps feeding their whole crew for $900 a day (and GREAT food, too!); that's about $4.50 pp. or less. Housing average is around $11 per day per person. About $15/day while on tour amounts to about $1000 in benefit provided to the marching member, and any "tour fees" paid over that amount is deductible. He also mentioned that, because the corps "income and purpose" is dependent upon the MM performance, that he'd argue that the MM is donating his/her services to the corps and should be entitled to a deduction for time and services provided. This is unlike, for example, a church-member donates time to volunteer at a fundraiser because the church is not dependent on either the volunteer or the fundraiser to provide its service. OK, so I use Bernie Madoff's ex-CPA and I may need internet access from my jail cell. So don't listen to what I say. But he did say that this subject is not spelled out in Federal tax law because drum corps are not schools, which means it's gray and arguable. Link to comment Share on other sites More sharing options...
Grumpy Posted September 12, 2011 Share Posted September 12, 2011 And how does "tax deductible" fall into this... Still have someone telling me a corps dues donation is deducatible. I think there's a distinction to be made between "dues" and "tour fees". I was part of an alumni corps (they happen to be a registered 501c, BTW) and we were charged "annual dues". Our dues went to pay for such things as rehearsal space rental, uniforms, instruments, travel costs if we rented a bus to get to a performance, etc. For the years in which I participated, I absolutely wrote off my corps dues each year as a charitable donation. I also deducted an allowance for charity-related mileage for my travel to/from my home to the rehearsal site throughout the year, and to/from any performances during the year. I took these deductions based on the premise that I gained nothing monetarily from donating my services to the organization and they are in fact a registered non-profit. I liken this somewhat to one of my current activities-I volunteer once a week for a church-run food pantry and once a month for a church-run soup kitchen. I take a charity-related mileage deduction for my travel to/from the facility during the year. In each case, I am donating my time and talents to a qualified organization, so I am entitled to take the deduction. FWIW, I am an Enrolled Agent and do taxes for a living. Link to comment Share on other sites More sharing options...
JimF-LowBari Posted September 12, 2011 Share Posted September 12, 2011 And how much would it cost me to have my semi-retired CPA find out for sure. Knowing her she'd tell me to find something more sure as she's in her 80s and doesn't feel like spending her free time talking to the IRS. Thanks for the (we aint' 100% ) info. Could give more details but someone might guess who I'm talking about. Link to comment Share on other sites More sharing options...
The Other Mike Posted September 12, 2011 Share Posted September 12, 2011 Giving to pay a member's dues is not tax-deductible because it's not a donation; the member directly benefits from that money. This discussion comes up on a semi-annual basis when members come looking for sponsorships and some have been erroneously informed that they can tell would-be sponsors "It's tax-deductible!" as an incentive. However, there is the wink wink nudge nudge factor that comes into play. A person can donate a $3000 instrument to the corps, use the receipt for taxes and a wink wink later, the kid marches for free that summer. It happens in private schools, why could it not work in drum corps ? Link to comment Share on other sites More sharing options...
WIS Posted September 12, 2011 Share Posted September 12, 2011 (edited) To be tax deductible the funds have to go to a 501©(3) organization. You should receive some form of acknowledgement from the organization stating how much you gave and the date. If that letter doesn't reference that the organization is a 501©(3) chances are very high that the amount is not deductible. If the non-profit organization is classified as anything other than a 501© (3) donations are not deductible. This could be organizations like the Rotary, Kiwanis, Shrine Circus, professional organizations, etc. If you give to a memorial for a friend/family member who passed - make your check out to the organization to receive the funds - not to an individual. Funds given to an individual are never deductible. (I am aware of an Olympic athlete who solicited money from individuals to pay his expenses - saying that it was deductible. It was not deductible as the funds went to the individual). Cash donations are no longer allowed as a tax deduction unless you have an acknowledgement from the organization of how much they received. So - coins in the Salvation Army buckets are no longer deductible. You have to subtract the value of any goods/services that you receive as part of your donation. Example - donate to your Museum and get a DVD - the deductible amount is your donation less the value of your DVD. Volunteers can take a charitable deduction for the value of any goods they provide the organization and related mileage. They can never deduct the "cost" of their time. So - a recruiting tool for volunteers is to let them know there could be some tax benefits. If they buy any supplies for the corps and aren't reimbursed they should be taking a charitable deduction (and have the proper receipt for the payment). If I were a parent paying "dues" to a corps for my child to be a MM I don't expect that I would get a deduction. The value of what is received is probably greater than what is paid. I don't know enough about current financial conditions of corps to tell that or the actual costs of supporting the MM during the year - while they are on tour vs. costs to support the MM if they were home. If I were to sponsor a MM and made a donation to a corps that was a 501©(3) I would take the full amount that I gave the corps as a charitable contribution. I did not receive anything of value in exchange for giving the 501©(3) my money (enjoyment of the shows does not count as "value" in this sense). My donation to Friends of DCI Scholarship Program will be fully deductible. If I were to become a Friend of DCI this year I believe I would take the full membership fee as a donation - based on the wording on the member form. DCI's wording simply is "tax deductible to the fullest extent of the law" - so they aren't going to state a value of any benefits. The ticket request is on a separate form. If the membership form and ticket request were on the same form it would be harder for me to argue that the value of a premium seat was only $80. It will be interesting to see how what the wording on the acknowledgement of the membership is. If it says "thank you for your donation of $x - the value of the goods you will receive is $y - then I can only deduct the net. Now, if something happens and I can't use the tickets and just give them away - I now have a fully deductible ticket. (I paid a 501©(3) and received nothing in return). I haven't looked up the code section for this lately - but I relate it to buying a suite in a stadium. I did have a client who had a suite at Lambeau Field. The cost of the suite was tax deductible since he used it for promotional purposes (taking clients, etc.). But we had to reduce the suite fee by the cost of the lowest ticket in the stadium - which was actually in the club seats. The cost of the club seats was lower since you had to pay separately for the ability to purchase the seat - and the adjustment was ridiculously low compared to the cost of the suite. This cleared an IRS audit - much to the dismay of the auditor since I'm sure the suite cost is what triggered the audit. I'm doing this off the top of my head (wow - that sounds pretentious) so I can't site code sections for anyone. WIS, CPA Oh....just in case...... ........ DISCLOSURE& CONFIDENTIALITY NOTICE To ensure compliance with Treasury Circular 230, we are required to inform you that any advice concerning U.S. federal tax issues contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. Edited September 12, 2011 by WIS Link to comment Share on other sites More sharing options...
WIS Posted September 12, 2011 Share Posted September 12, 2011 However, there is the wink wink nudge nudge factor that comes into play. A person can donate a $3000 instrument to the corps, use the receipt for taxes and a wink wink later, the kid marches for free that summer. It happens in private schools, why could it not work in drum corps ? I'd be winking so much they would probably think I have a twitch. Link to comment Share on other sites More sharing options...
garfield Posted September 13, 2011 Share Posted September 13, 2011 If I were to become a Friend of DCI this year I believe I would take the full membership fee as a donation - based on the wording on the member form. DCI's wording simply is "tax deductible to the fullest extent of the law" - so they aren't going to state a value of any benefits. The ticket request is on a separate form. If the membership form and ticket request were on the same form it would be harder for me to argue that the value of a premium seat was only $80. It will be interesting to see how what the wording on the acknowledgement of the membership is. If it says "thank you for your donation of $x - the value of the goods you will receive is $y - then I can only deduct the net. Now, if something happens and I can't use the tickets and just give them away - I now have a fully deductible ticket. (I paid a 501©(3) and received nothing in return). DCI does, in fact, send out a notice to members stating what the value of their deduction is based on the tickets they got. I've gotten one every year. The persnickety point is whether or not paying dues to a 501c3 corps is deductible. I maintain that it would be, minus the food and shelter allowance. This is coming from my crook CPA, and I pay an astonishingly low fee for his advice. So take it as it is. Link to comment Share on other sites More sharing options...
garfield Posted September 13, 2011 Share Posted September 13, 2011 Back on topic... What minimum amount of their year's income should a corps have in the bank before they leave for tour? Link to comment Share on other sites More sharing options...
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