Thursday, June 11, 2015

Research Q of the Week: Are Cities Nonprofits? (6/11/15)

Question: A citizen wants to make a donation to the city, and we want to accept! But the donor is asking for our articles of incorporation or charter that proves we are a nonprofit so the donor may take a tax deduction. I’m pretty sure donations to the city are tax deductible, but what can we show the donor to prove it?

Answer: Most of us are used to giving donations to non-profits organized under section 501 of the Internal Revenue Code. They are referred to as 501 or 501(c) organizations, they have articles of incorporation showing they exist for charitable purposes and so a donation to one of those organizations is generally tax deductible. However, cities are not 501(c) organizations with articles of incorporation. So what do you show donors?

It turns out donations to cities are tax deductible under 26 U.S.C. 170(a), making them essentially “170 organizations.” Since an incorporated city doesn’t have articles of incorporation to show a potential donor, the Internal Revenue Service will provide a city a letter which the IRS states is sufficient proof for any donor to substantiate a tax deduction. Isn't that nice of them?

To obtain that letter, go to the IRS website, which will provide more information and direct you to call 1 (877) 829-5500.


Written by Edward Cadman, special counsel with the League of Minnesota Cities. Contact: ecadman@lmc.org or (651) 281-1229.


This blog post conveys general information. It’s not legal advice. Please check with your city attorney before acting on this information. 

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