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Joined: Mon Mar 26, 2012 10:01 pm

Re: Tax consequences of donations

Tue Apr 03, 2012 9:52 pm

Background:  If you're a taxpayer in the USA, I believe you can deduct money you donate to charity from your income for tax purposes.  (DISCLAIMER:  I'm not an accountant.  If you have doubts about your own tax situation you should definitely ask for advice from a qualified professional about your specific situation, not automatically believe a random forum post on the 'net.)  For example, if you make $50,000 a year and donate $1000 to charity, your taxes are calculated as if you'd earned $49,000, not $50,000.  (Of course a typical tax return would be much more complicated than this, but that's the basic idea.)

But I think that, in order for donors to claim this tax benefit, the non-profit they're donating to must be registered with the US tax authorities and follow certain regulations.

Most people who donate $100 or less probably won't want to bother with filling out all the paperwork for a miniscule benefit (it's just a tax deduction, not a tax credit).  So it probably won't greatly affect website donations, buy-one-give-one, or small-time donors.  But if the RPi Foundation wants to be able to attract large donations from wealthy individuals or corporations in the US, those types of donors will almost certainly really want to claim the tax deduction.

So I think it would be worthwhile for the Foundation to look into this issue.  Probably by asking for help from an accountant who has experience helping UK organizations navigate the US tax system.  (I'm sure Broadcom and the distributors have plenty of such accountants on staff, though they might not be as familiar with the rules for nonprofits.)  Even if you have to hire someone to do the paperwork, you'll probably still be ahead after your first large US donation.

You might even get lucky and find out you don't have to actually do anything because the US and UK have some sort of reciprocal agreement, where your UK nonprofit status is enough to convince US tax authorities that you're definitely a charity and donors should be able to claim deductions.

None of this applies to me; if I make a donation, it'll be too small for me to care much about the tax consequences.  And I know that they're not accepting donations from random people yet.  I just thought of this issue since it's tax season in the US (April 15 is the deadline for most US taxpayers to submit their tax paperwork for the previous year).  So I wanted to put this question out there.

And you should also probably post the information near the donation button on the website (whenever you roll that out).  Something along the lines of "if you're in the US, and you make a donation to the Foundation, here's what you should know about your taxes."  And sections for the UK and other countries too, of course, if their tax laws have similar provisions

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Re: Tax consequences of donations

Tue Apr 03, 2012 10:14 pm

This is a very complicated area, and US citizens donating to other than US charities (defined as  501(c)(3) organisations) do not automatically qualify for tax relief.

I have looked into this for a couple of other charities I am involved with, and I'm not aware of any reciprocal arrangements between the US and UK regarding this, and would doubt there are any, so if you have any direct references to such arrangements , please let me know!

The most effective way for smaller charities to benefit from US tax deductions is probably to register with an organisation such as CAF America http://cafamerica.org which IS classified 501(3)(c), and was set up specifically to enable US taxpayers to donate tax-effectively to overseas charities. This would be something that the RPF would have to do themselves though, although I believe registration is relatively straightforward.

Posts: 166
Joined: Thu Aug 04, 2011 10:59 am

Re: Tax consequences of donations

Tue Apr 03, 2012 10:54 pm

Th Raspberry Pi Foundation is registered as a charity with the UK tax authorities, so UK tax payers can take advantage of the UK gift aid scheme. For people with higher rate tax and capital gains this can be advantageous, but take professional advice. We need the donors real name and address and writtten (or email) notice that they want to donate under the gift aid scheme.

We have had a couple of donations via CAF https://www.cafonline.org/  with whom we are registered

We have also discussed setting up a US charity, but until we have significant volume and presence there the administrative overhead isn't worth it. Never a good idea to let your organisation's structure to be determined by the tax laws, rather than what you want to do.


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