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The son of an employee wants to commit monthly donations to the program his mom spearheads at our 501(c)(3) agency.  He wants to commit to nearly $20,000 over two years to help assure the program's sustainability and his mom's employment. He is asking that a commitment to his mom's work schedule be documented in the thank you letter? Is this legal?

Yes, it is legal.  It just isn’t deductible as a charitable contribution.  If you are willing to commit to employ his mother for two years, he can commit to giving you $10,000 a year toward her salary.  But since it is a quid pro quo arrangement, and he is presumably getting his money’s worth from the payment, there is no gift element and hence no deduction.

If he gave you a monthly donation and directed that it be used to pay his mom’s salary, it would not be deductible because it was directly for the benefit of a designated individual and also not a charitable contribution.  Even if he made no long-term commitment and merely made a monthly donation so long as his mom is employed, based on the course of conduct you describe, although some may disagree with me, I think it would be hard to argue that it is not based on an “understanding” with the charity and therefore a quid pro quo.

You can test his charitable intent by asking whether he is willing to make the $20,000 commitment with no commitment on your part about the continuation of the program or his mom’s employment.

Comments from our Readers

I suppose he wants to donate instead of giving money directly to his mother so he can get a deduction.  If there is nothing in writing about this arrangement, couldn't he just give donations as long as his mother was employed and stop giving if she were let go? --V.R. via e-mail

Why not tell the donor that the organization can not accept a quid pro quo gift like this? It would cost him his deduction and it is against the policy of the organization.  If he would like to make directed gifts to his mother's program, that is acceptable and he would be free to discontinue giving should he not be satisfied (i.e. if his mother lost her position).  He could give in monthly installments so that should anything change, he could just stop giving. --J.G. via e-mail

I struggled with this concept, but as I said above, even if the understanding is not in writing, if the "gifts" are based on the understanding that mom will remain or has remained employed, it is difficult to argue that the payment has been made with disinterested beneficence to support the organization. --Don Kramer

Perhaps there's midground here? It's not like a parent asking to deduct cost of tuition pd, a cost parent would incur anyway. This is a donation & could be restricted to pgm mom works for. Charity would breach fid duty to promise to keep mom even if she's not performing well, but could say verbally that things will continue as is so long as working well. Son is not receiving direct benefit. . . .--M.P. via e-mail

2/8/2011

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