by Kimberly K. Egan MHC President (first published in the November 2023 Equiery)
Our November issue is typically our Giving Issue, designed to get everyone ready for Giving Tuesday. It’s that time of year when non-profits hope for end-of-year donations and taxpayers look for tax deductions. But many find the process of sifting through charities somewhat daunting. Fortunately, there is an entire cottage industry to help you make sure you are working with and giving to a legitimate cause. National organizations (such as GuideStar and Charity Navigator) have become watchdogs for all types of charitable giving and they provide useful information to the general public.
As a threshold matter, whether an organization qualifies as a charity is a question of federal tax law. The section of the tax code that explains the various types of non-profit organizations is 26 U.S.C. § 501. That is why you hear so many people referring to non-profits as “501s.” Not all 501s, however, are charities, and not all donations to a 501 are tax deductible.
True charities are the most common type of non-profit in the horse industry, and they are organized under sub-section (c)(3) of 26 U.S.C. § 501. Section 501(c)(3) status is generally available for any corporation that is “organized and operated exclusively for . . . charitable . . . or educational purposes,” or to “foster . . . amateur sports competitions,” or to “prevent cruelty to animals or children.” The primary limitation on 501(c)(3)s is they cannot use charitable contributions for private gain, and they cannot be in the business of “attempting to influence legislation . . . or interven[ing] in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.” Generally speaking, 501(c)(3) charities must keep their lobbying expenditures under 20 percent of their total expenditures.
It is important to always confirm that the charity to which you plan to contribute is a 501(c)(3) because contributions to 501(c)(3)s are generally deductible to some degree as charitable donations – depending on an individual’s tax status of course – whereas contributions to many other kinds of non-profits are not. Each of the charities evaluated by Guide Star and Charity Navigator meet this basic requirement.
Moreover, both GuideStar and Charity Navigator have tools for assessing the accountability and transparency of a charity. Charities that follow good governance and transparency practices are less likely to engage in unethical or irresponsible activities, which means your charitable contribution is more likely to go to support the charitable mission that is important to you. It also means that charity is less likely to run afoul of federal or state taxing authorities, thus jeopardizing the tax-deductible nature of your contribution.
In addition, the watchdog agencies have ratings systems for charities, much like investment houses issue ratings for publicly traded equities. One of our long-time Industry Professional members, Gentle Giants Draft Horse Rescue, has just received the highly coveted 4 Star rating from Charity Navigator. Their 4 Star rating is the highest possible rating that a charity can receive, and it means that Gentle Giants “exceeds or meets best practices and industry standards across almost all areas” and is “likely to be a highly-effective charity.” According to Charity Navigator, it means that Gentle Giants is “great.”
The horse industry owes a great deal to volunteers and charities. This season, thank them in one of the most meaningful of ways – give wisely, give generously, and give often!
For more charitable contribution tips, see “Tips for Giving Tuesday” on equiery.com!