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Non-Prof Organization Contracts

Discussion in 'Business Fundamentals' started by ibelee, Jan 3, 2005.

  1. ibelee

    ibelee Senior Member
    Messages: 188

    Here's a question for you Pro's:

    I currently hold 5 Contracts w/ Non Profit organizations. One of them has asked that I "donate" my services to one of their smaller properties and write it off as a tax deduction. Has anyone had any experience with this? It seems to be a win/win situation.
  2. plowed

    plowed Senior Member
    Messages: 344

    I would say to obviously check with your accountant or tax attorney. On the surface it seems OK, but do you need the deduction? Cash is cash and you may need the cash more than the deduction. Also, how about materials, salt, etc.? You would then be going out of pocket to make these purchases/provisions, etc.?

    I would also find out what it does to your liability. Probably nothing, but a question worth asking.

    Remember, in order to have a write-off, you still need the income to write it off against. If you're already looking at a break-even or a loss position, the deduction won't be much good.

    Remember too that non-profit can be very misleading. There are many organizations that hold non-profit status for the sake of income taxes, but they do indeed turn a profit. Many non-profit companies are typically required by some agency to have a minimum reserve amount or percentage, therefore, they are required to have a certain level of net income.

    Don't let the non-profit status throw you, especially if it's a Credit Union, or some organization of the like. A volunteer center/agency or some like organization may be different.
  3. scuba875

    scuba875 Senior Member
    Messages: 250

    I agree with Plowed. I would say take the money. If you really need the deduction donate some money to one of your favorite charities.
  4. ibelee

    ibelee Senior Member
    Messages: 188

    Non-Prof Deduction

    Thanks for the advise.
    I guess I didn't give enough info.
    This deduction would be to offset some of the money earned from the General Contracting side of the business. In addition, the client is a County funded rehabilitation center with 4 properties.

    As far as the Liability...Thanks, I'll ask the question.

    Materials are not a part of my Contract with the Organization. This is a "push only" contract with materials as extras.
  5. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    I don't know the legalities, but I would never contract for donating services. Ask yourself - Would you normally donate this amount to this organization? I especially would not "donate" services to any organization that asked for me to work for nothing.

    My advice is what I've said before - Keep business and charity separate.
  6. GreatPlains

    GreatPlains Junior Member
    Messages: 19

    I don't think it is legal to write off the value of your service except for any tangibles used such as the value of supplies or mileage at the IRS donation rate (not business mileage rate).

    First - I donate lots of time (and other resources such as cash and equipment) to organizations I choose to support. Most are charitable 501-C3 tax exempt, some aren't and aren't deductable at all. I support them because I believe in what they do and want to share the fruits of my labor (and blessings) with them. I deduct what I can but would still support them even if it wasn't deductable.

    You can look at this a couple ways, whether you can deduct it or not:

    1. You agree with their mission, what they do, believe they are good stewards with the resources they have been entrusted with, etc. and have a desire to support them; or

    2. You think it would be good business to help them out and it wouldn't take much time, etc. to do the small lots.

    It really comes down to what your gut says - help them if you feel you should and they are a reputable non-profit. Otherwise, keep it a business transaction and politely decline the opportunity to donate. If you decline but later feel like you don't mind helping them one or two times during the season, send them an invoice anyway and write "No Charge" or something similar on the invoice. That way you have documented the value of the service and they can appreciate the donation.

    I think we all need to be sensitive to situations like this and donate time and assets as we are able. Unfortunately, though, there are some real scams out there as well. You have to sort them out and ask enough questions to validate the mission of the organization.

    My $.02

  7. b2driver

    b2driver Member
    from MD
    Messages: 89

    Tell them you'll "donate" your services, if they "donate" some cash.
  8. SteveVB

    SteveVB Member
    Messages: 66

    I think the only way for both of you to benefit from a donation is for them to expense the snow removal and pay you, and then you make a donation(basically you refund their cost)- they get the deductions and show an expense(they may not be able to get "free" snow removal every year and their budget will be fawked up if all of the sudden they have to pay for it), you get the revenue and the deduction.
    I plowed for a church this way- they had a budget line item to give them an accurate picture of their expenses, I got the deduction for the charity.

    My question is do you contribute to this NPO now? Would you? If not I would pass.
  9. ghost

    ghost Member
    Messages: 65

    The guy who asked you to plow the lot for free, go ask him if he works for free
  10. JustUsDe

    JustUsDe Senior Member
    Messages: 181

    Well since they took the reputation points away I want to publicly tell Plowed, Mick, Greatplains, and SteveVB You all gave well thought out opinions and advice. I read the thread and thought I could help but after reading your replies I need to add nothing but thanks to you guys for answering in such a professional matter. It's refreshing to see a thread with such useful advise like in the past.

  11. ibelee

    ibelee Senior Member
    Messages: 188

    Thanks for your advise.

    Thanks to all who responded.

    I made a call to my Tax Preparer and come to find out he is a Tax Lawyer also. He told me that donating services and claiming it as a Tax Write Off is perfectly legal and is done all the time by large and small companies(ie. Home Depot and Habitat for Humanity, and Contractors who participate in Christmas in July). The trick is the documentation. The contract must include the pricing for the service of the donated property. The account must be billed as you would any other account, but in the amount owed box it must read "Donation". And as you guys said, the type of NPO is also important.

    Thanks again.
  12. CamLand

    CamLand Senior Member
    Messages: 301

    Just remember Churches are non-profit also and i have no problem billing them.. payup payup
  13. ibelee

    ibelee Senior Member
    Messages: 188


    Neither do I.
    2 of the 5 NPO's I have under contract are Large Church/Schools that I have done GC work for in the past.
    I believe someone mentioned that we don't work for free, but if we can throw in a $75 driveway and win a contract and still get the money back at the end of the year, what have I lost?
    Again, it seems like a win-win situation.

    Thanks for your reply.

    Also meant to mention that I love your flag.
    One day I'll be as computer savy as some of you guys and be able to do stuff like that.
    Last edited: Jan 7, 2005
  14. justme-

    justme- 2000 Club Member
    Messages: 2,138

    Just make sure your not giving too much away for what your getting. I do alot of gratis plowing- but it is for whom I feel like when I feel like it. Last storm I was doing a customer's drive and saw an elderly woman shoveling her driveway up the street so I plowed it- as I opened the end she said thanks you but I have no money and I told her not to worry and to go back up to the walkway so I could get the rest for her. She was thrilled, I felt good, and she was safer for it instead of shovelling for the next hour.

    That's my kind of donation for services. Any "organization" that wants my services donated had better have something of equal value to donate to me, cash or otherwise.

    Now remember the most important thing about donating and taxes- if you don't donate enough you don't get credit for it. you have to break the threshold of the Standard deductions before the donations actually are worth anything as a donation. (learned that the hard way)