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I work for a web development company that has been donating services and hosting to a new nonprofit that has not yet received its 501(c)(3) recognition. The organization’s site currently claims they have obtained this status. My question is twofold: 1) Is there a possibility of prosecution for our company or for the organization? 2) If exempt status is not received, can we still claim an itemized donation deduction?
It is unlikely that a web host would be prosecuted for a misrepresentation on a hosted website, but the organization could be prosecuted for misrepresentation if the site is used to solicit contributions. It would be simple to say that the application is pending, assuming that is the case, in order to avoid that misrepresentation.
As to the deduction, I am sorry to inform you that you are not entitled to claim a deduction for the gift of services or facilities even if it is recognized as exempt. If you have out of pocket costs for a third party host, you could deduct the proportionate share of that cost, but you cannot deduct for the value of your services or the use of your computer capacity.
June 18, 2009
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