I've researched the standard publications, (526, 1771), IRC Section 6115 and web-sites and have not yet found authoritative language that specifically states that a donation made by an individual through another individual or company is not deductible.  The common scenario is that a person decides to collect contributions, whether made in cash or otherwise, and remits the cumulative total to the NFP in one check.  Example:  NFP receives a $1000 check from Mary accompanied by a list of 10 donors and addresses, each who have given $100 to Mary, thinking that their donation is deductible.

The only language I've found isn't satisfactory for a layperson.  Not everyone "gets" that Mary isn't a qualified organization or legally required to remit funds.  Does anyone have an authoritative response for this scenario that they can send or give me a link to?

Thanks.

What the prevailing understanding is in 526 where it clearly states that giving money to an individual does not qualify as a charitable contribution.  If the check a person signs is made out in the name of an individual and not a charity - they gave money to an individual and in an audit that is exactly what the IRS would say.  They have no phisical proof of what that other person did with the money.

The place I go for authoritave figures on this is www.fundsvcs.org.  They have a huge listserv of professionals who have to make these types of decisions on proper gift processing and receipting and many have gotten official responses from the IRS that you may be able to take a look at.

Hello again Melissa.

I am familiar with pub 526.  Affirmation of the literal language was not what I was trying to get.  A volunteer or donor won't readily accept that language because donor intent isn't honored, nor is does it make sense if it can be proven that contributor money ultimately got to a qualified organization.  For you and I, "prevailing understanding", which is another way of saying "interpretation", is fine.  Not for well-intended persons whose motivation to help is seriously dampened when we can't, at least, give them clear language that makes sense.  I am just amazed that this situation isn't explicitly addressed anywhere.  Not in www.fundsvcs.org, not in www.stayexempt.org, not anywhere I've looked.  It may be in IRS rulings or in court archives, but I don't have the time or expertise to search those sources of information.

Regardless, I appreciate your input.  Frankly, I didn't expect anything more helpful considering the source (IRS) of the requirement.

Thanks!

Hi Melissa,

I wanted to follow-up on this topic and get your input on another scenario.  Despite the palpable frustration and poor attempt to relay sarcasm, I welcome opinions even if only to affirm that we are not alone in our frustration.  After weeks of trying to nail down responses that will satisfy our many event volunteers and picking the brains of professionals, etc. we continue to end-up with unsatisfactory comprehensive statements. I'd say I'm overthinking the issue except that others also express frustration with the meager guidance, not neessarily the lack thereof.

So, on the point of checks made out to individuals, where fundraising volunteers collect cash instead of checks, they are instructed to prepare a detail with all required gift information (name, address, amount, etc), and for cash security purposes, to deposit the money in a bank as soon as possible and obtain a cashier's check for the total.  The cashier's check and support schedule are forwarded to us.  A contributor or volunteer would argue that this is no different that giving a check to an individual for later transmittal, with support, to the NFP organization. Substantively, the only difference is the payment method.  

We were told that we should provide volunteers with organization acknowledgments or receipts in order that the actual donor receive appropriate credit for their gift. That seems to just skirt the intent issue.

I'm just curious if others are confronted with questions from event volunteers who zone in on this frustrating IRS regulation.  Is the general solution simply to provide receipts to volunteers for on-site completion?  Letters won't work because there is no method to control how many are issued. 

Thanks! 

The IRS issue is such that in an audit, although the donor may have gotten a receipt if the IRS requests a copy of the check, all they have is a check made out to John Smith - not XYZ non-profit.  If collecting checks - always have the individuals write out the check to the organization.  It is the only way to verify they are the donor.  If collecting cash - this is where I have the most trouble with individuals - they should never deposit the cash (or checks) into their own bank account - it is not their money.  They can - should they choose - bring cash to the bank and have it put into a money order to not have so much cash on hand if they have an issue with that.

I would never give a volunteer access to IRS receipts without them receiving full training in how to properly receipt donors.  If the donor is getting benefits in return for their donation (a t Shirt for a $25 donation, for example) then the receipting gets even more challenging.  I would leave this important legal documentation to a trained - preferally paid - staff member.  Improperly receipting gifts comes with stiff penalties from the IRS (including the possibility of losing your 501 c 3 status) and I would be very hesitant to lose control over how your receipts are being issued.

Thanks Melissa.

I agree with you 100% on the issue of volunteers having access to receipt documentation.  It has been our policy not to do this and I was surprised when a certain external professional recommended this as a solution. 

The cash issue remains a problem, however, because we have a network of volunteer affiliates around the nation who hold all manner of events and collect cash in amounts large and small.  We don't like them to forward bundles of cash so we recommend the cashier's check route.  Bank accounts in each and every location is not cost effective.  We have been advised that as long as we have adequate detail, we can make an argument that is sufficient to support the issuance of a receipt. As you can see, this is a flaw in the IRS guidance and there is no reasonable solution other than to prohibit cash altogether.  Given the confidence in the banking system in general these days, that's not likely to be received warmly! 

Thanks for sharing your opinion and process.

Now, if anyone has any ideas about how to meet PCI standards at volunteer driven events, i'm all ears!

Rena