By Robyn Guilliams
Dear Law & Order: Performing Arts Division –
Many nonprofit arts organizations have board members or other affiliated parties who offer their services free of charge or at a reduced rate to support the organization. Is it possible for the nonprofit organization to give a tax letter for the value of the donated services? If so, under what circumstances and how should it be handled to comply with tax rules? Examples would be a photographer who gives her services at a reduced rate or an advertising agency that offers graphic design services free of charge.
Thanks for a great question – one which causes a good deal of confusion in our industry. The value of services donated to a nonprofit organization is NOT deductible.
However, one who donates such services may be able to deduct certain amounts that she pays for expenses incurred while donating services to the charity. To be deductible, those amounts must be:
- Unreimbursed;
- Directly connected with the services donated;
- Expenses one has only because of the services donated; and
- Not personal, living or family expenses.
Here are a few examples of what types of expenses are – and are not – deductible:
- You drive 15 miles each way to provide services as a volunteer to a charitable organization. You can deduct either 1) the actual cost of the gas and oil used for that drive; or 2) fourteen cents ($0.14) per mile for the trip (the current mileage reimbursement rate for charitable deduction purposes).
- You serve as a volunteer usher at a performing arts venue, and you must purchase a uniform for this purpose. You can deduct the cost of buying and clearing your uniform if the uniforms are not suitable for everyday wear, and you must wear them while volunteering.
- You pay a babysitter to watch your children while you do volunteer work for a charity. You cannot deduct these costs, even if they are necessary for you to do work for the charity (because it is considered a family expense.)
Note that to claim any of these expense deductions, the services provided must be to a registered 501(c)(3) organization. Also, while a written statement from the organization isn’t necessary for these expenses, it is a good idea to keep written records (and receipts, if they exist) for these expenses, and any other tax deductions you intend to take!
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For additional information and resources on this and other
legal and business issues for the performing arts, visit ggartslaw.com
To ask your own question, write to lawanddisorder@musicalamerica.org.
All questions on any topic related to legal and business issues will be welcome. However, please post only general questions or hypotheticals. GG Arts Law reserves the right to alter, edit or, amend questions to focus on specific issues or to avoid names, circumstances, or any information that could be used to identify or embarrass a specific individual or organization. All questions will be posted anonymously.
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THE OFFICIAL DISCLAIMER:
THIS IS NOT LEGAL ADVICE!
The purpose of this blog is to provide general advice and guidance, not legal advice. Please consult with an attorney familiar with your specific circumstances, facts, challenges, medications, psychiatric disorders, past-lives, karmic debt, and anything else that may impact your situation before drawing any conclusions, deciding upon a course of action, sending a nasty email, filing a lawsuit, or doing anything rash!