Disaster Relief: An Intro For 501(c)(3)s And Others
In the aftermath of Hurricanes Harvey and Irma, we can applaud the overwhelming outpouring of generosity of spirit and money to help the many in need.
There’s been some chaos, though, in the mechanics of the disaster-relief effort. Now – with the 24-hour news cycle, the phenomenon of instant communication via social media, and the rise of ad-hoc fundraising innovations like crowdfunding – established relief charities like The American Red Cross are not the only agencies receiving donations and disbursing help.
Disaster Relief Overview: Publication 3833
Recognizing that “[p]roviding aid to relieve human suffering caused by a natural or civil disaster or an emergency hardship is charity in its most basic form,” the Internal Revenue has issued Publication 3833 (Rev. 12-2014), “Disaster Relief: “Providing Assistance Through Charitable Organizations.”
This helpful, 28-page long, guide – available online – offers information about disaster relief primarily – though not exclusively – through established 501(c)(3) disaster relief agencies.
The Table of Contents of Publication 3833 gives a glimpse into the scope of the advice:
- Helping Through an Existing Charitable Organization
- Establishing a New Charitable Organization
- How Charitable Organizations Help Victims
- Employer Sponsored Assistance Programs
- Special Tax Rules for Recipients of Disaster Relief Assistance
- Gifts and Charitable Contributions Rules
- Additional Help on Disaster-Related Topics (Forms and Publications; Telephone Assistance
“By using this publication as you begin to plan your relief efforts,” the publication begins, “you will be able to ensure that your program will assist victims in ways that are consistent with the federal tax rules that apply to charities.”
In the initial section about existing 501(c)(3) relief agencies, “including churches,” the IRS suggests that these established organizations “are frequently able to administer relief programs more efficiently than individuals acting on their own.” They can continue the aid program over a long period, the assets are irrevocably dedicated to charity purposes, they can offer tax deductions, and aid recipients are generally not subject to federal income tax on the value of relief for their personal needs.
The agency explains, though, that “… even if a charity was not specifically organized to provide disaster relief and such activities were not specified in its application for exemption, an existing recognized charity may engage in disaster relief activities without obtaining prior permission from the IRS. However, it must report this new activity on its annual return and may wish to report a change in its activities to the IRS Exempt Organizations Determinations Office.”
Also, “in the immediate aftermath of a disaster or emergency, those who wish to provide help may overlook existing charities and spend precious time and resources establishing a new charitable organization and applying for tax-exempt status.“ Nevertheless, the IRS acknowledges that this is sometimes a valid path of action for the general public who want to help, and offers information on how to start a new 501(c)(3) for this purpose and request expedited exemption-application treatment. Alternatively, though, it suggests that better options may be to “combine resources with an existing charity to provide immediate relief, or see whether an existing charity operating in a related area may be interested in establishing a special program to address a particular disaster or emergency hardship situation.”
Disaster Relief Standards for Charities
In addition to the detailed information in Publication 8388, there is also a relevant entry on the IRS website about charitable organizations titled “Disaster Relief: Standards for Charities That Provide Relief to Individuals”:
“What are the standards for charities that provide disaster relief to individuals?
In general, providing relief to victims of a disaster is a charitable activity because it aims to relieve human suffering – charity in its most basic form. To further this purpose, an organization must benefit a charitable class. Thus, the organization must apply a needs-based test and maintain appropriate documentation.”
These links include important definitions and guidance for charities regularly involved in disaster relief or for those that want to participate on a short-term or otherwise limited basis.
Warning About Disaster Charity Scams
On August 29, 2017, the Internal Revenue Service issued a special bulletin: IR-2017-137: “Beware of Fake Charity Scams Relating to Hurricane Harvey.” It begins:
While there has been an enormous wave of support across the country for the victims of Hurricane Harvey, people should be aware of criminals who look to take advantage of this generosity by impersonating charities to get money or private information from well-meaning taxpayers. Such fraudulent schemes may involve contact by telephone, social media, e-mail or in-person solicitations.
Sadly, the need for this information about how best to meet a community’s urgent needs for disaster support is not limited to Hurricanes Harvey and Irma, or the remainder of the 2017 hurricane season. It applies to emergencies all year long around the nation including here in earthquake country.