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)
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.