Q: You answered our question last month about training privately owned dogs as assistance dogs. To review, currently we train service dogs for persons with multiple disabilities and offer them to carefully matched individuals without charge. But, we have been approached by a number of non-client-eligible people who would like their pets certified. Since this is an expensive process, we wanted to know if we were putting our nonprofit status in jeopardy if we asked payment of those who request our services but do not fit our mission criteria. We appreciated your answer. We have a couple other questions that are related.
Can the non-disabled pet owner consider the significant expense for training, including evaluation and follow-up over a nine-month period, a tax-deductible donation?And, if the person cannot afford to pay our fee, can he or she raise the money by engaging in fundraising activities on behalf of our organization?
A: I would say no on both counts.
The cost of training is not tax-deductible to the pet owner because he or she is getting services equivalent to the amount you are charging. The IRS disallows any tax-deductibility unless the amount paid is over the fair market value of the service, which is not the case as you described it.
If you were to tack on an additional charge – for instance, to help you cover the expenses of training dogs for the disabled population with which you primarily work – the private pet owner would be able to take a tax-deduction, but for that extra “donation” amount only.
Whether or not you decide to charge your paying clients a little more in order to better support your program, I suggest you make it very clear in all your materials, including contracts, both what the fair market value of the training is and what, if any, portion of the total can be considered a donation. This will protect your organization when someone writes his or her check to the organization and then tries to take the entire amount as a donation, which I guarantee will happen!
For more information on fair market value, click here.
I see two problems with asking a potential, non-client eligible, service recipient who can’t afford to write a check for the training, evaluation and follow-up, to raise the dollars by fund raising for your organization. First, is that there is no tax deductibility for donations made to benefit a specific individual. I guess that your pet owners could be very open and say that they are asking for money to pay the training costs for their own pets, and as such, any donations would be considered as outright gifts to the solicitor. There may be a few generous souls who will respond to that appeal with a check, though I doubt very many.
The bigger concern is the potential for putting your nonprofit status in jeopardy. If these individuals are out there using your organization’s name and maybe your logo, how do you control what they say or how the logo is used? How do you ensure that they state clearly that any monies raised will be used personally and not for the disabled population your organization is in business to serve? How do you ensure that they specify that there can be no tax-deductibility? And how do you ensure that records are kept in a manner sufficient for your accountant and the IRS? I’d be hesitant to send a group of people with a strong personal interest in the outcome out into the community, even with training. But, if you are interested in pursuing this further, read here for additional information on using third party fundraisers.
Personally, I think this would be much cleaner if you just charge your rate. If someone cannot afford it, he or she may be able to find another venue to train his or her dog – even if it means that the training is less intense and the result lacks your level of certification.