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    herobattousai's Avatar
    herobattousai Posts: 1, Reputation: 1
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    #1

    May 25, 2016, 03:26 PM
    Non-profit service offered in exchange for donations?
    Hi I am a member of a 5013c non-profit and to get us donations I have come up with the basic idea of offering a serving for a range of donations is this legal? I live in Alabama
    joypulv's Avatar
    joypulv Posts: 21,593, Reputation: 2941
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    #2

    May 25, 2016, 04:10 PM
    Your recipients of services have to fit the definition of your mission statement, I believe. Otherwise you are getting 'paid' (donation) for 'services' and that's just a regular business subject to taxes.

    An unaffiliated non-employee can 'sell' his services on behalf of the 5013c, for a dollar, on agreement that they donate.

    (A common type of non-profit exchange is called an in-kind donation, but that doesn't really apply to your case.)
    Fr_Chuck's Avatar
    Fr_Chuck Posts: 81,303, Reputation: 7691
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    #3

    May 25, 2016, 08:37 PM
    Agreed, also, if it is a equal echange of work for money, it may not be considered a donation merely a payment of services, performed by the non profit.

    Those services must be connected to the mission of the non profit, or the money received for those services may be taxable. Non profits are still taxed on money received that are outside of the basic non profits concerns.
    ebaines's Avatar
    ebaines Posts: 12,130, Reputation: 1307
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    #4

    May 26, 2016, 06:14 AM
    Basically if you sell services that are not "substantially related to the organization's exempt purpose" then you must report and pay taxes on the profit. So for example if your organization is a school and the service you offer is car washes, it's probably unrelated to your purpose and hence taxable, but if the service is a tour of your facilities or an educational seminar then it may be related and hence tax-exempt. There may be an issue if the magnitude of money you receive for unrelated purposes grows to be 20% or more of your total revenues - if it gets to be that significant then you may run afoul of IRS guidelines and should seek professional council on the risks (FYI this is often an issue with museum coffee shops and gift shops). You should also investigate whether there are state or local sales tax issues - regulations on this vary widely by locality. Finally, be aware that the "donor" is not actually a donor, but rather a buyer, and he can only take a charitable deduction on his income taxes for the portion of his "donation" above the market value of the services he receives. Be sure that you don't make the mistake of issuing a charitable gift receipt like you do for true cash donations.

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