Are Donations to Local Governments Tax Deductible?
March 27, 2013
Local governments may accept donations, but are those donations deductible from the donor’s federal income taxes? In most cases, yes.
A gift to a local government entity is tax deductible if it is solely for “public purposes." The IRS Code, at 26 U.S.C. §170(c)(1), defines "charitable contribution" (which is tax deductible) to include "a contribution or gift to or for the use of":
A State, a possession of the United States, or any political subdivision of any of the foregoing, or the United States or the District of Columbia, but only if the contribution or gift is made for exclusively public purposes.
Note that a local government – a city, county, or special purpose district – is considered to be a “political subdivision” of the state.
So, when would a gift to a local government not be “for exclusively public purposes”? I’m not a tax expert, but I would think that most gifts to local governments would be given only for public purposes. The IRS code does not specifically define “public purpose,” but it has been interpreted in part to mean that the contribution or gift must not be intended to benefit any particular individual. If a donor has any question about this, he or she should consult a tax expert.
What does a local government need to provide a donor to substantiate the gift for IRS purposes? See IRS Publication 1771, "Charitable Contributions – Substantiation and Disclosure Requirements."
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