I canāt imagine anyone would ever sue a charity for this.
I think the main issue isnāt the charity being sued, but loss of 501c3 status?
Hereās an example of a situation the IRS might be worried about: I give $100k to charity in 2023, the charity gives me a āno goods and servicesā receipt, and I deduct $100k from my income in figuring taxes, and I save, say $30k. Then in 2024 I tell the charity āIām sorry, I lost my job, Iām in danger of losing my house, and I need the money backā. They give me the money back, and I donāt 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 charityās operations (and be seen as a breach of the public trust or a fiduciary duty)
checking to confirm that the refund wouldnāt make the charity close-to-insolvent (this is the only scenario I see in which a suit by a non-governmental actor seems plausibleāif 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)
I think the main issue isnāt the charity being sued, but loss of 501c3 status?
Hereās an example of a situation the IRS might be worried about: I give $100k to charity in 2023, the charity gives me a āno goods and servicesā receipt, and I deduct $100k from my income in figuring taxes, and I save, say $30k. Then in 2024 I tell the charity āIām sorry, I lost my job, Iām in danger of losing my house, and I need the money backā. They give me the money back, and I donāt 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 charityās operations (and be seen as a breach of the public trust or a fiduciary duty)
checking to confirm that the refund wouldnāt make the charity close-to-insolvent (this is the only scenario I see in which a suit by a non-governmental actor seems plausibleāif 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.