charitable contributions deductions

What Other Items Will the IRS Allow Volunteers to Deduct on Their 2020 Taxes?


What does the Tax Reform Act of 1986, signed into effect by then-president Ronald Reagan, have to do with the deductions volunteers can take on their 2020 taxes? What if they volunteer to bring their children on a Scout-related field trip but actually have a good time? Are their expenses still deductible? Julian Block answers these questions and more in his third and final (for now) column on charitable-activity-related deductions.

Nov 24th 2020
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In two previous columns, I discussed deductions available to Valerie, a volunteer who incurs unreimbursed, out-of-pocket expenses when she helps raise funds or perform other tasks on behalf of charitable organizations like religious groups, schools, and hospitals.

In this column, I’ll discuss how things play out when Valerie ventures forth on what she characterizes as deductible travel on behalf of a charity that I’ll call SAG, short for Save Africa’s Gorillas. The IRS says SAG is a scam.

Why? Because back in President Reagan’s second term, a bi-partisan Congress passed and he signed the Tax Reform Act of 1986, a comprehensive overhaul of the Internal Revenue Code. The legislation included a little-noticed provision that abolished deductions for charitable trips that are disguised vacations.

Internal Revenue Code Section 170(k) limits deductions for travel expenses, including lodgings and meals, incurred by volunteer workers who perform services away from their homes on behalf of charities. It allows deductions only when there’s “no significant element of personal pleasure, recreation or vacation” in an away-from-home trip.

Here’s how 170(k)’s restrictions affect Valerie. They apply to payments made directly by Valerie of her own expenses or of someone associated with her, such as a member of her family, as well as indirectly through reimbursement by SAG.

A reimbursement, warns the IRS, includes any arrangement for Valerie to make a payment to SAG and its reimbursement of her travel outlays. To stop an end run around the disallowance rules, 170 (k) also bars reciprocal arrangements, that is, where two unrelated persons pay each other’s expenses or members of a group contribute to SAG and it pays for all of their expenses.

170(k)’s limitations are subject to an important exception. The deduction remains available for payments Valerie makes to cover the expenses of other persons who participate with her in, for instance, a camping trip.

Let’ say that Valerie is the CEO of a dot-com venture. Two of her daughters are Girl Scouts. She serves as the leader of her daughters’ troop and often takes the group on camping trips.

Valerie’s responsibilities include overseeing the setup and breakdown of campsites, providing the adult supervision for other activities throughout the outings, and transporting the troop home. That litany of activities, says the IRS, entitles Valerie to charitable deductions for payments of expenses for girls who belong to the troop and are unrelated to her, but not for expenses for her daughters.

Having fun isn’t fatal. What if Valerie has a dandy time whenever she takes kids camping? Does her euphoria erase any write-off for her own expenses? Not necessarily. The IRS concedes that Valerie’s expenses are allowable, provided she “is on duty in a genuine and substantial sense throughout the trips.”

This holds true even though she enjoys the trips or likes supervising children. Those outlays, however, become nondeductible when Valerie is assigned only “nominal duties relating to the performance of services” for the group. Ditto when she isn’t required to perform services for “significant portions of the trip.”

The Tax Court has stated—albeit in a context other than that of charitable write-offs—that “suffering has never been made a prerequisite to deductibility.”

Several columns down the road, I’ll cover what Valerie can and can’t deduct for away-from-home-overnight expenses that she incurs for, say, sumptuous repasts at top-tier restaurants and accommodations at plush places. Why all that spending? Because Valerie’s charitable work obligates her to mix and mingle with A-Listers and bold-face names at events like soirees and banquets.

Additional articles. A reminder for accountants who would welcome advice on how to alert clients to tactics that trim taxes for this year and even give a head start for next year: Delve into the archive of my articles (more than 350 and counting). 

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