Townships May Accept Charitable Contributions

The accounting firm of C.L. Coonrod & Company has agreed to provide financial guidance & solutions to us related to shortfalls and temporary cash-flow issues.  Here is the sixth installment.

Townships May Accept Charitable Contributions.

Townships can accept donations from individuals and treat them as charitable contributions.

IRS will view as charitable any donation to “the United States or any state, the District of Columbia, a U.S. possession (including Puerto Rico), a political subdivision of a state or U.S. possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions.”

That means the contributor may deduct the amount on his or her tax return.

Contributions of this kind usually come in response to a specific appeal by the Trustee for support of a particular program, but any voluntary contribution to a township can be treated as charitable.

A tax deduction is allowed for contributions of physical items, such as food and clothing, as well as cash. However, contributions of volunteer service time are generally not deductible.

Cash contributions can be deposited into any Township fund and appropriated for any purpose for which Township is allowed to expend public funds. We presume most Trustees will want to expend the money in accordance with the wishes of the donors, but it must always be for an allowable public purpose.  If desired, the Board can be asked to establish separate gift funds to account for the contributions.  In all instances, expenditures are subject to Board appropriation.

Some Trustees have asked if they can establish 501(c)(3) organizations to accept charitable donations.  Generally a Trustee can do that, but it is a lot of paperwork.   It may be easier simply to deposit donations into a Township fund.  Establishing a 501(c)(3)  organization would be preferable only if the objective is to expend funds in ways not allowable for township government.  For example, a 501(c)(3) could expend funds without Board appropriations or for charitable assistance to persons not eligible for ordinary township assistance.

We hope the information above is helpful as general guidance, but, in specific circumstances, please first consult your township attorney.

C.L. Coonrod & Company
3850 Priority Way South Dr, Indianapolis, IN 46240
(317) 844-4450
coonrod@coonrodcpa.com