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Abstract: 

There are some situations in which a charitable organization may return a contribution—for example, where, despite appearances, no charitable gift was legally made because the donor lacked capacity or was subject to undue influence; or where, due to the absence or occurrence of a certain condition, the charitable organization is divested of title in the gifted property. However, a charitable organization can face a variety of negative consequences if it returns a contribution. For charitable organizations that are tax-exempt and described under IRC §501(c)(3), the risks of the return of a donation include revocation of tax-exempt status (due to inurement or nonincidental private benefit) and imposition of excise taxes (for self-dealing, an excess benefit transaction under the Intermediate Sanctions, or a taxable expenditure). This article outlines the risks of a charitable organization’s returning a contribution and explains the specific circumstances in which a return may be permitted.

Keywords: IRC IRC §4941, §4945 excise taxes; Revocation of Exemption for Private Inurement; PLR 201321034

Affiliations:  1: Strasburger & Price, LLP; 2: Southern Methodist University School of Law.