IRS Definition of a Charitable 501C3 Framework. To be a 501(c)(3) tax-exempt organization, the IRS website states that an organization: must be a corporation, community chest, fund, or foundation cannot have earnings that inure to any private shareholder or individual must be organized and operated exclusively for charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and the prevention of cruelty to children or animals . Source: IRS Website:
Click here, if you like to download Waste to Charity’s Determination Letter determinationletter_jpg .
Don’t worry – we have PLENTY of copies- when you donate to us – we’ll send you your paperwork!~
Congress provides incentives under the tax laws to encourage donation of inventory to non-profit organizations. These laws provide an incentive to businesses for donating slow-moving items prior to marking down the price. By donating items that today are collecting dust on a warehouse floor or a retail outlet shelf, donors can save the cost of other expenses related to maintaining the inventory, including the cost of warehousing, handling, and/or disposing of the items.
Internal Revenue Code, Section 170e3 creates an enhanced deduction for corporationsto take a deduction up to twice the cost of producing an item (when the value is higher than the cost). Before the enhanced deduction was put in place, companies could only deduct an amount equal to their cost for an item donated to an IRS 501c3 public charity. However, the inventory or other property may have a fair market value higher than its cost. Under 170e3, an enhanced deduction allows the donor to take a deduction up to twice the cost/basis of the item if the value is higher than the cost.
Donated property under 170e3 must be used for the ill, needy or infant (using IRS definitions). Equipment used by a facility providing service to the needy also qualifies. The same acknowledgement requirements that apply for any donations still applies under 170e3 donations. Though materials that are donated under 170e3 cannot be resold, organizations may charge a “user fee, handling fee, or donation fee” to recoup their expenses.
How does the enhanced deduction under 170e3 work? See the sample computation below and work with your accountant or tax advisor to see how you can benefit from donation of inventory. (Source: IRS.gov)
|
Sample Computation |
|
|
Fair Market Value (Selling Price) = |
$1,000 |
|
Basis (Cost to Company)= |
$ 200 |
|
Gain = (Difference between FMV and Basis, or “mark up“)= |
$ 800 |
| Step 1: Determine the Gain | |
|
Fair Market Value $1000 – Basis $200= |
$ 800 |
| Step 2: Reduce the deduction to not more than 1/2 the gain | |
|
Gain $800 x 1/2 = |
$ 400 |
|
Fair Market Value $1000 – 1/2 Gain $400 = |
$ 600 |
| Step 3: The deduction cannot exceed twice the basis or cost | |
|
$600 – 2 x Basis (2 x $200 = $400) = |
$ 200 |
| Step 4: Add the limitation in Step 1 to the limit in Step 2 and subtract from the fair market value to determine the deduction | |
|
$1000 – Gain ($400 + $200) = |
$ 400 |
|
Deduction = Twice the Cost |
The IRS allows a company to take up to half the gain (mark-up) on an item, but not more than twice what the company paid for it. (Source: IRS.Gov)
NOTE:
Click Here for our IRS Determination letter: ( April 19,2006 ) w2c-Permanent-determination
Click this for an 8283 form. This is the form which our Donors receive
OK, we’ve talked enough about YOUR taxes- now, let us speak about ours: We like our Donor partners to know who they are working with. If your CFO , CEO or Tax Preparer is interested, here are our 990 forms ( tax Returns ) for every year of operation.
Waste to Charity’s Actual Tax Returns ( Non-Profit Version of Normal W-2 or W-4 Forms )
2001 Waste To Charity Actual Charity Tax Return Year 2001
2002 Form 990 Waste to Charity actual tax Return Year 2002
Waste to Charity’s 2003 Tax Return 990 Form Actual Tax Return