TO
TITHE OR NOT TO TITHE
August
2007
Q: Can nonprofits
tithe to another nonprofit from donations or contributions
it has collected? If so, under what expense category
should this be listed in our
books?
A: Great question! When you say “tithe,” in my mind it conjures
up a regular remittance, which would probably raise
some flags with donors and the IRS both. It should
also raise flags with your board of directors.
Let’s
start with your board. Regular readers of this column have seen me
harp on the fact that directors have the legal duty
to make decisions in the best interest of your organization.
Taking money away from YOUR programs to support
another organization’s programs is not working in the
best interest of your organization. Beyond the legal and moral issue here, it is
conceivable that a recipient of your services who feels
harmed by a decision such as this – perhaps that recipient
has to pay more for services or faces the loss of services
altogether because revenues are now insufficient to
cover your programs – could sue the organization and
the individual directors.
And
let’s consider how your donors might feel.
They are giving to YOUR organization to support
YOUR mission. They
clearly believe in what you are doing and wish to invest
in the future you have painted for them.
While that does not necessarily mean that they
don’t already or wouldn’t also choose to invest in this
other organization, that choice
belongs to them. Perhaps
they know this other organization and for some reason
do not support it. They would resent that their money is going
there. That is not a good way to maintain long-term
relations with your donors!
Then
there is the IRS. It gave you a determination letter based on
your raising money for YOUR cause. It may not
look too favorably on such a situation.
While it may not come down to that, are you willing
to risk your nonprofit status?
There
may be instances where it is politically wise to make
a donation to an organization with which you are collaborating
or that has a shared mission.
But generally, such donations are relatively
minimal and only made if your bylaws permit them.
If
your bylaws do permit them, the conditions for making
such donations should be spelled out. And, to answer your last question, if your bylaws
permit such donations there should be a line item in
your budget for donations.
