Providing Disaster Relief

Providing Disaster Relief

August 31, 2017

The effects of Hurricane Harvey brought the topic of disaster relief to the fore for all of us. As no doubt many of you will be active in providing assistance to those in need in our community, we wanted to share with you some common tax questions and resources that could be useful for organizations providing aid in these circumstances.

Below are a few questions we often see on this topic and most are further explained in IRS Publication 3833.

Can my organization grant funding to another nonprofit organization to provide disaster relief?

Except for certain restrictions on private foundations described below, tax-exempt organizations can provide disaster aid either directly to impacted individuals or indirectly through grants to other organizations.

 Are donations to qualified §501(c)(3) charity tax-deductible? 

Yes.

 Can my organization provide aid to individuals?

Yes, but a more complete answer depends on the nature of the organization providing aid. Public charities have few restrictions on giving to individuals, provided the recipients are part of a charitable class and not selected on a discriminatory basis. Private foundations have restrictions on grants to individuals for travel, study or similar purposes, but grants to individuals for relief for declared federal disaster are not subject to this restriction. Regardless of your organization’s mission, an existing tax-exempt organization can start a special program for disaster relief without requesting advance permission from the IRS or creating a new nonprofit entity.

Who qualifies for aid?

This answer can depend on the type of aid provided. Organizations need not evaluate the financial need of recipients for immediate emergency aid like food, water, clothing, housing (including repairs), or counseling services. For longer-term types of aid like income replacement or funds to replace property, the recipients’ financial resources and likelihood of insurance coverage need to be considered.

Can my organization assist our employees or members?

Yes, however, if the pool of grant recipients is restricted, like employees of a specific organization, the number in the pool must be large or indefinite. In other words, the program should be open-ended and not benefit specific employees or their families. Well-designed employer-sponsored benefit plans have applications explaining policies for assessing eligible recipients and a selection committee with members not in a position of substantial influence over employer affairs. Also eligibility factors are nondiscriminatory. Payments pursuant to such a plan do not constitute compensation to the employee.[1] An employer-sponsored private foundation may only provide aid in connection with a federally declared disaster, rather than emergency disaster support, like a fire or medical emergency.

Can individuals raise funds as an agent of a charitable organization?

Individuals or entities can accept donations on behalf of or as an agent for a charitable organization though it can be more burdensome than when a charity accepts donations directly. The key is solicitations and documents must establish an agency relationship and cannot stipulate funds go to a particular individual or family.  A written agreement between the charity and agent should be in place prior to the agent acting on the charity’s behalf.

 

[1] Because Hurricane Harvey is a Presidentially declared disaster, IRC Section 139 applies and qualified disaster relief payments (see page 15 of IRS Publication 3833) made to impacted individuals (including employees) are not includible in taxable income.