It’s hard to believe that December is already here and the Holiday Season has begun. We are just a few short weeks until the end of the year, and the end of your opportunity to benefit from a bit of charitable good will. I’m sure that many of you are receiving countless solicitations for donations. Each year many of us reach into our pockets and donate toward many deserving good causes. But, to whom should you donate?
There are so many charitable organizations these days it is difficult to decide between them. Perhaps leaving you to not decide and thus to not donate. Is the organization using your donations toward the goals stated? Is the organization properly organized and using sound business practices? Is the donation going to make the difference you hope for? Will your donation be remembered? Is your donation going to allow you to recognize a charitable deduction on your tax returns? These are just a few questions often raised by donors.
Fortunately, there are steps you can take to answer your questions. A good first step before donating to any charitable organization is to verify that it is eligible to receive tax-deductible charitable donations (and thus provide you with a tax deduction). The Internal Revenue Service maintains a list of those nonprofits who took the extra step to be deemed a tax exempt charitable organization under Internal Revenue Code Section 501(c)(3), located at: www.irs.gov/charities-non-profits/exempt-organizations-select-check. From the Select Check Tool you can search and find eligible charitable organizations, or determine if your organization has had their exempt status revoked.
The State of Michigan, Department of Corporations has a tool that allows you to search any corporation that is located or conducting business in Michigan, located at: http://www.dleg.state.mi.us/bcs_corp/sr_corp.asp. This tool will show if the charity is in “Active Status” or if it has been dissolved or “Automatically Dissolved”, a situation occurring when a business failed to file its required annual return to the Corporations Division for three years. You can also locate past entity filings showing who the registered agent is, and who the current and past directors and officers are. It can be cumbersome, but there is a wealth of information available to help you verify a possible recipient of your hard earned dollars is in good standing and legitimate.
There are also numerous online organizations that review and rate charitable organizations. Consumer Reports, Charity Watch and Charity Navigator are just a few. These organizations are limited in what they are able to review and may or may not have biases in their reviews, but it provides another resource of information. These also only tend to review the mega charities leaving the smaller, local charitable organizations, which are the vast majority of charities, without ratings.
Better yet, create your own charitable organization. By creating a new public charity or private foundation you contribute funds in endowment and disburse the income and proceeds generated for years to come. You can create a lasting legacy for your family and your name. A foundation provides you control over where, how and when the funds are spent. When you establish a new foundation, you have a choice to create a public charity or a private foundation. Both have many benefits and limitations ranging from limitations on deductibility to the extent of control you or your family would retain over the organization. Most donor’s goals live somewhere in that grey area between qualifying as a public charity versus a private foundation. Most charitable organizations can be established in a few short weeks, and thus there may still be time this year to create your legacy and to gain the philanthropic and tax benefits.
Deciding where to donate, or which type of charitable organization takes careful examination on how you would like the organization to operate in order to determine which is best for you and your family. Let us help guide you through the complexities of forming a new foundation and allow you to remain focused on continuing your success into the New Year!
For further information regarding these matters, please contact Mr. Cnudde at 248.528.1111 or via email.