Also I would hope (although I think it’s unlikely) that if donors feel upon hard times then they felt they could ask us as OneDay health for their money back—this would be a rare scenario and we would be very happy to return it!
I wonder if there could be a way for charities to specifically sign up to a refund agreement through something like basefund, and then basefund could almost be an “underwriter” for situations where the charity couldn’t manage paying the money back.
Maybe this is impractical but it makes some sense to me at this point.
Also I would hope (although I think it’s unlikely) that if donors feel upon hard times then they felt they could ask us as OneDay health for their money back—this would be a rare scenario and we would be very happy to return it!
Are you legally able to do this? I thought that once a donation had been made you were obliged to use it to advance your charitable objectives, and giving money to donors in the US does not seem likely to promote health in rural Uganda.
One should check applicable law before returning a donation, which could vary from jurisdiction to jurisdiction. This article by a CPA suggests that “if a donor asks for a smaller donation back, it’s usually best to return it. Larger donations may be harder to return. In this circumstance, talk to your legal and financial advisors — and possibly your state’s not-for-profit agency.” The rationale isn’t stated, but I suspect the business-judgment rule might apply here. In other words, it may be possible for the charity to decide that furtherance of good donor relations justifies refunds under certain circumstances as a means of achieving the charity’s objectives.
Thanks you might well right, I never would have figured something like this! Us doctors arent always the great at legal stuff!
Seems awfully sad to me though. Donations are done volunteraly and generously, so it seems a bit sad not to be able to give them back in a very rare case. I can’t imagine anyone would ever sue a charity for this.
I can’t imagine anyone would ever sue a charity for this.
I think the main issue isn’t the charity being sued, but loss of 501c3 status?
Here’s an example of a situation the IRS might be worried about: I give $100k to charity in 2023, the charity gives me a “no goods and services” receipt, and I deduct $100k from my income in figuring taxes, and I save, say $30k. Then in 2024 I tell the charity “I’m sorry, I lost my job, I’m in danger of losing my house, and I need the money back”. They give me the money back, and I don’t tell the IRS.
My checklist would probably go something like this:
tax issues (as you described)
concerns about potential preferential treatment of an insider
concerns about whether a refund could materially impair the charity’s operations (and be seen as a breach of the public trust or a fiduciary duty)
checking to confirm that the refund wouldn’t make the charity close-to-insolvent (this is the only scenario I see in which a suit by a non-governmental actor seems plausible—if the charity ended up unable to pay other obligations, the refund could be a constructive fraudulent conveyance)
donor bankruptcy issues (as described in my top-level comment)
As a charity operator, I love this idea.
Also I would hope (although I think it’s unlikely) that if donors feel upon hard times then they felt they could ask us as OneDay health for their money back—this would be a rare scenario and we would be very happy to return it!
I wonder if there could be a way for charities to specifically sign up to a refund agreement through something like basefund, and then basefund could almost be an “underwriter” for situations where the charity couldn’t manage paying the money back.
Maybe this is impractical but it makes some sense to me at this point.
Are you legally able to do this? I thought that once a donation had been made you were obliged to use it to advance your charitable objectives, and giving money to donors in the US does not seem likely to promote health in rural Uganda.
One should check applicable law before returning a donation, which could vary from jurisdiction to jurisdiction. This article by a CPA suggests that “if a donor asks for a smaller donation back, it’s usually best to return it. Larger donations may be harder to return. In this circumstance, talk to your legal and financial advisors — and possibly your state’s not-for-profit agency.” The rationale isn’t stated, but I suspect the business-judgment rule might apply here. In other words, it may be possible for the charity to decide that furtherance of good donor relations justifies refunds under certain circumstances as a means of achieving the charity’s objectives.
Thanks!
Thanks you might well right, I never would have figured something like this! Us doctors arent always the great at legal stuff!
Seems awfully sad to me though. Donations are done volunteraly and generously, so it seems a bit sad not to be able to give them back in a very rare case. I can’t imagine anyone would ever sue a charity for this.
I think the main issue isn’t the charity being sued, but loss of 501c3 status?
Here’s an example of a situation the IRS might be worried about: I give $100k to charity in 2023, the charity gives me a “no goods and services” receipt, and I deduct $100k from my income in figuring taxes, and I save, say $30k. Then in 2024 I tell the charity “I’m sorry, I lost my job, I’m in danger of losing my house, and I need the money back”. They give me the money back, and I don’t tell the IRS.
Or problems with the state charity regulator.
My checklist would probably go something like this:
tax issues (as you described)
concerns about potential preferential treatment of an insider
concerns about whether a refund could materially impair the charity’s operations (and be seen as a breach of the public trust or a fiduciary duty)
checking to confirm that the refund wouldn’t make the charity close-to-insolvent (this is the only scenario I see in which a suit by a non-governmental actor seems plausible—if the charity ended up unable to pay other obligations, the refund could be a constructive fraudulent conveyance)
donor bankruptcy issues (as described in my top-level comment)
Yeah thanks, given all these concerns, I think my idea is bad unfortunately. Seemed nice at first but not practical.