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It's The Season for Wise Charitable Giving
This is the time of year when charitable organizations pull at both your heartstrings and your purse strings. During this season, generous Michigan citizens are asked to give time, money, or goods to charities that do important work in our communities.
As donors, we must choose among the many charities asking for our donations. Although most of these organizations operate with charitable intentions, there are a number of "charities" in which little of your donation finds its way to a worthy cause, so you should educate yourself regarding the soliciting charity before donating. You have a right to know how your donation will be used. The many wonderful, legitimate charities in Michigan will gladly provide you any information you request.
This alert will help you make an educated choice. In addition to this alert, Michigan nonprofits have partnered with the Attorney General to create the joint annual release Giving Wisely. That and more information regarding charities is available on the Attorney General's website. Below are some of the tips to help you give wisely.
You are entitled to answers to all the following questions before you donate:
What is the name, address, and phone number of your organization?
If a charity won't provide this information or give you time to verify it, this should raise a red flag, particularly if the request for your money comes by telephone from an unfamiliar organization. You may always ask that information about the charity be mailed to you before you make a decision.
Website solicitations should give you a street address and contact information - don't settle for a post office box number. If the solicitation is face-to-face, ask to see the identification given to the solicitor by the charity; and if you have any doubts, tell the person soliciting that you will need time to consider which charities you will be able to support this year.
Is your organization registered to solicit donations by the Michigan Attorney General's office? What is your registration number?
Most charities, professional fundraisers, and police and fire groups soliciting in Michigan are required to register with (or be licensed by) the Attorney General; they also must file annual financial reports with the Attorney General. You can check an organization's status at the Attorney General's website or by calling 517-373-1152. While a registration is not an endorsement of a charity, it does mean that the organization has filed annual financial statements and other documents with the Attorney General. These reports are available to the public, and the data from these reports populates AGCharitySearch.
Also, since not all organizations are required to apply for a registration, many legitimate charities will not appear on the list. (Churches, for example, are permitted to solicit contributions without a registration.) If you don't find the charity you are searching for on the list, please contact the Attorney General's office; Attorney General staff if you don't find the charity that you are searching for on the list. The Attorney General's staff can tell you if the organization is exempt from registration.
How much of my donation will actually be used for the charity's purpose?
Many donors are shocked to learn that, in some instances, less than 10% of their donation will go to the charity. Some charitable organizations contract with professional fundraisers and agree to receive only 10% or 15% of total donations collected. This is why it is so important to educate yourself before donating.
Exactly what information should you ask for? The solicitor is required to give you a truthful answer when you ask, "What percentage of my donation does the charity keep after all fundraising costs are paid?" It is important to ask the question using this exact wording because often donations are funneled through a bank account with the charity's name. Thus, if you ask "How much does the charity get?" The solicitor can say that 100% goes to the charity, while in fact after being billed for fundraising costs, the charity ends up with very little. Ask solicitors for their name and employer - is it a charity or a for-profit fundraising business? Even when the caller states that he or she is employed by the charity, a professional fundraiser may still receive the bulk of the donations.
Write down the information you are given and consider calling the Attorney General's office to verify it. Contracts between professional fundraisers and charities are required to be filed with the Attorney General.
You may also want to ask the charity, "What percentage of my donation is used for program services (the organization's charitable purpose) rather than on administrative, management, or fundraising costs?" In some cases, the organization may do little charitable work other than support its fundraisers or founders. With so many worthy charities to donate to, it is important to make sure that your generosity is being well used.
Lastly, remember that you can always politely end the call, research charities on your own at AGCharitySearch or with sites like GuideStar, Charity Navigator, or the National Center for Charitable Statistics, and give directly to the charity of your choosing. Better yet, use your bank's bill pay feature to create a recurring monthly donation. This way, your charity gets 100% of the donation.
What's going to happen to my donation?
Charities should provide information on the programs supported by your donations. They should be able to provide an annual report showing what proportion of your contribution will go to program costs and how much is used for administrative costs or fundraising. If a charity fails to be transparent, you should consider donating instead to one that is.
If you are not satisfied with information provided, you can find out what the organization has reported to the IRS. If you would like to review an organization's recent annual IRS reports, ask for a copy of its most recent "IRS Form 990 or 990 EZ." (Tips on reviewing IRS Form 990 are contained in the article by Peter Swords, "How to Read the IRS Form 990 & Find out What it Means.")
The Attorney General's office can also provide copies of the IRS Form 990 or 990 EZ for charities licensed in Michigan or direct you to another source for those charities which may be exempt from licensing. Both the National Center for Charitable Statistics and GuideStar offer excellent databases of IRS Form 990s.
If the donation is other than money, the charity should be able to tell you how it will be used. Clothing and household goods are not necessarily used by the organization itself but instead may be sold by the truckload for a flat fee to a company that will sell them for their profit. The car that you think may be used by the charity or given to a person who needs it to get to their job may instead be sold by another company, with only a small portion going to the charity. The charity may receive nothing more than a flat fee per month from the company collecting and selling the vehicle in exchange for the use of the charity's name in their business.
Is my donation tax-deductible?
For your donation to be tax deductible the organization must have received 501(c)(3) status as a charitable organization from the IRS. 501(c)(3) organization's may be searched using the IRS's Select Check.
A number of factors may limit the amount that you can deduct, including the type of donation (such as money or personal property), whether you receive something of value in return, your income, and whether you itemize deductions. You may wish to contact the IRS or a qualified tax professional for a more detailed explanation.
The IRS rules for charitable contributions are explained in IRS Publication 526. You may also call the IRS at 877-829-5500.
Some types of donations deserve special mention at this time of the year when charities may appeal to donors seeking to maximize deductions for charitable contributions:
- Churches, synagogues, temples, mosques, and government entities are generally not required to obtain 501(c)(3) status. Donations to these institutions are still deductible.
- Donations to many organizations composed of police, fire, and other public safety officers are not tax-deductible, because they do not qualify for 501(c)(3) status.
- Donations to individuals cannot be deducted. While contributions to better a specific needy family's holiday are commendable, they are not deductible. However, contributions to a qualified organization, which then chooses which needy families to support, are deductible as long as you do not specify who receives your contribution.
- Motor vehicle contribution rules have changed. Although some deductions are still calculated at fair market value, in general they are limited to the gross proceeds of the sale by the organization. See the Attorney General's Consumer Alert on Car Donation Programs or contact the IRS for more details.
- Donations of clothing and household goods made after August 17, 2006, must be in good condition.
- Always obtain a receipt.
Can I use the Internet to donate?
Many charities maintain websites that will give you detailed information about their programs and structure. Some even have their financial reports available. It is certainly one way to gather information you can use to give wisely. But remember that anyone can put up a website - in fact, some scam "charities" have very professional looking sites - so don't let a website be your only guide. Some useful rules to follow are:
Be sure if you are donating online that the website is secure. If the address changes from "http" to "https" when you go to donate, you are using a site that is secure.
There are thousands of scams online seeking to trick you out of your personal information, be cautious! Never give out your social security number.
Be extremely wary if you receive an email request for a donation. If the sender is unfamiliar, the Attorney General recommends deleting the email message without opening it. For more information on scams seeking your personal information, see the Attorney General's alerts listed under the heading "Identity Theft."
Scammers on the Internet may use logos of respected charities or adopt names very similar to well-known organizations. If you are tempted to give to a charity you learn about online, research the organization first. You may contact the Attorney General's Charitable Trust Section or review the IRS's Select Check.
Most charitable groups are committed to helping solve society's problems. They will give you the respect that you are owed as a donor, and the time and answers that you need to make an informed decision. Here are a few tips to avoid mail and telephone solicitations that steer donations away from these legitimate organizations.
- Bills or invoices sent to you even though you never pledged money to the organization.
- Evasive, vague, or unresponsive answers to specific questions about the charity and how money is used.
- Words as part of a charity's name that closely resemble a well-known charity.
- Allowing no time to reconsider your pledge; they insist on collecting your donation immediately.
- Refusal to answer questions about where your money will go, refusal to send information about the charity, or refusal to provide a receipt.
- Emotional appeals and high-pressure tactics to get you to make a quick decision or feel guilty about not contributing.
Before you write that check:
Review AGCharitySearch, the Attorney General's website, or call the Attorney General's Charitable Trust Section at 517-335-7571 to inquire about a charity. For questions about police and fire organizations, call the public safety organizations hotline at 800-769-4515.
Check on an organization's license and learn more about charities, public safety organizations, and the laws they must follow by visiting the Attorney General's website.
Learn the facts first, then please donate generously.
Where can I go for help?
Consumers may also contact the Attorney General's Charitable Trust Section at:
Department of Attorney General
Charitable Trust Section
P.O. Box 30214
Lansing, MI 48909
Charitable Trust Website