The 501(c)(3) nonprofit I work for is working for a cure for a rare disease. Many of our members affected by the disease live in Puerto Rico. The CEO wants to have a fundraiser to raise funds to be donated to Puerto Rico. Would those contributions be tax deductible since we are not in business to raise funds for hurricane victims?
Yes. As a charitable organization, you can raise funds for charitable purposes and give deductibility for such gifts so long as they are not earmarked for specific individuals or non-charitable purposes. Helping the people of Puerto Rico with hurricane relief at this time is clearly charitable.
It is an interesting question, however, because it is directly relevant to the legal issues of unrelated business income tax (“UBIT”). You can be taxed on business income if it is not related to the specific purpose for which your organization is exempt. (See Ready Reference Page: “Nonprofits Often Worry About UBIT”) But a charitable organization can raise funds for its general operations and give deductibility to those contributions, even if it has some non-charitable activities. Since your purpose here is clearly charitable, I wouldn’t worry about it.
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This issue raises the question I have been dealing with for some time.
We are asked to donate to the Red Cross, for example, to give relief to the victims of disasters.
But, a small percentage actually goes to help those victims.
How can we find ways to give directly?
This is not a "legal" question but perhaps the issue of the best way to give to charitable organizations might be of interest to your readers.
Thank you.
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