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Q: Can a registered charity issue tax receipts for donated computer time? ( Answered 5 out of 5 stars,   3 Comments )
Subject: Can a registered charity issue tax receipts for donated computer time?
Category: Business and Money > Accounting
Asked by: universityresource-ga
List Price: $15.00
Posted: 29 Apr 2004 19:28 PDT
Expires: 29 May 2004 19:28 PDT
Question ID: 338601
Dear Google Answerer,
I participate in a large international charitable organization which
is able to issue tax receipt.
Recently we were asked if we could issue receipts for the donation of
computer time.  We have a large membership who donate thousands of
computer hours on their machines (some home pc's, others commercial
servers).  The computers crunch numbers for us remotely and then post
the results.

Without their donated computer hours the organization would have to
purchase the computer hardware so their computer time is as good as
cash to us.

Can we issue tax receipts for this computer time?

Clarification of Question by universityresource-ga on 30 Apr 2004 11:30 PDT
As in the example just provided it is the issue of the donation of
computer hardware.
If the computer were donated I understand that we could issue a
receipt for its value, or if it were provided for a period of time we
could provide a tax receipt for the leased value of the computer for
that period of time.

In our case the computer time is donated however it is accessed remotely.
Subject: Re: Can a registered charity issue tax receipts for donated computer time?
Answered By: taxmama-ga on 02 May 2004 09:35 PDT
Rated:5 out of 5 stars
Dear universityresource,

Of course you may issue a receipt for the computer time. 
Put the number of hours received from that company on the receipt, 
not the value. 

If you need a value, you could use the amount it would have cost
your organization if you had to pay for the time. 

However, can the company getting the receipt take a chartiable
deduction for it? That's another question entirely.  

If they had to pay for the time, they have a deduction. 
If they paid for their computer connection by the hour, 
that would also be a deduction.
If they did not pay for the time, there really isn't anything to deduct. 

Incidentally, if they were paying for all the time and the 
connection time, they're already picking it up as a business
expense. So, it's already being deducted. They are better off
leaving it as a business expense, because charitable deductions, 
for corporations, are limited to a percentage of their profits. 
Often, their profits are not high enough to allow for the deduction,
so they need to carry it forward for a year or more. (Use it in 
future years.)

If the companies are large enough to have accounting staff, they'll
know what they may and may not deduct, in relationship to the 
contribution. It may also be possible that they want the receipt
simply for their annual reports, to confirm their community 

All those examples in the comments below, of CPAs or lay people donating
time miss the point entirely. If the CPA had wanted to take a deduction
for his donated time, he'd first have to pick up, in income, the value of
the time donated, as a sale. Then he would get to deduct it. 
The net effect would be -0-.  That's why donated personal time is never 
a deduction. 

In general, you'll find more information about contributions in IRS
Publication 526

And they only address personal time and services, here, not CPU time.

I hope this clears up some of the confusion. 

Best wishes

Your TaxMama-ga

search - experience - bookmarked link to IRS Publications

P.S. If you're very adventuresome or curious, you can search for legal cases
and precedents at Legal Bitstream
universityresource-ga rated this answer:5 out of 5 stars and gave an additional tip of: $5.00
You are brilliant and an asset to Google Answer.  
Many Thanks,
Martin Holmes
University Resource

Subject: Re: Can a registered charity issue tax receipts for donated computer time?
From: uofagrad-ga on 30 Apr 2004 09:19 PDT
Nope, can issue them a charitable deduction.  For someone to get a
charitable deductions for services the services have to be
perfessional in nature, i.e. somehting that requires specific training
and that others can not do. Let me provide an example:
  you have a phone-a-thon and 100 people work for fours hours
answering phones.  Well those people dont get a charitable deduction
for their time.

Now consider you have a donor who is a CPA and does the tax work for
the non-profit and then doesnt charge you guys for it.  Well in this
instance the person would get a charitable deduction.

The ability to allow the chartiable deduction is not based upon need
or nessissty.  It is soley based upon the professional ability of the
other person.  So I dont think you computer people would qualify.
Subject: Re: Can a registered charity issue tax receipts for donated computer time?
From: universityresource-ga on 30 Apr 2004 11:26 PDT
Let me give you an example to clarify the question:

 A member has a server (or PC of some kind) 
-that server operates for 4000 hours a year
-the member donates 2000 hours of that server time to our registered
charity and our system tracks every CPU hour of use precisely.
The Member is not at the server, nor is his work or labor involved in any way.
Subject: Re: Can a registered charity issue tax receipts for donated computer time?
From: aht-ga on 01 May 2004 17:41 PDT

I am providing you my opinion in the form of a comment, as this is
really an issue that you should contact the IRS to discuss directly if
you are interested in pursuing this course of action.

The IRS does not discuss donating CPU time in particular in their publication 526:

However, on pages 5-9, they do discuss what cannot be deducted.
Included in this is the general topic of "value of time and services".
There will of course be exceptions; specialized services which the
charitable organization would have had to purchase, such as the CPA
services mentioned in the comment above, might be acceptable as long
as it is not regarded by the IRS as compensation for the income lost
by the CPA while providing those services. In other words, the
deduction is for the value of the services provided, NOT the income
the CPA could have otherwise earned if he/she had not used the time
for the charity instead.

The CPU time that your members are donating to your organization most
likely will not be regarded by the IRS as a real or tangible good,
meaning that it does fall into the category of gift of service (which
again generally is not deductible).

Looking at pages 4-5 of the above publication, you will see additional
guidelines in the section entitled "Out-of-Pocket Expenses in Giving
Services". This section discusses that the only deductible expenses
are those that are incurred ONLY because the individual provided
services to a charitable organization. Unless a donor can demonstrate
to the IRS that the expenses associated with running their PC or
server during a specific period were incurred solely due to providing
your organization with processing time, even that would be disallowed
on their income tax returns.

As for approaching this as a lease, you would need to demonstrate that
your organization receives exclusive use of the computing equipment
during the times and dates involved. While I am not familiar with your
specific project, the many distributed computing projects that I and
the PCs I control are involved in make use of 'idle time'; I retain
full control over the availability of my PCs. Therefore, I would not
be able to claim that I have leased the use of my PCs to those
organizations, and there is really no way for those organizations to
create such a verifiable system without requiring me to install
software that effectively dictates when I can and cannot use my
computers. Even then, the contract between the organization and myself
would need to be very carefully vetted with the IRS to see if they
will even approve such a gift of service as a one that for which a
charitable donation receipt can be issued.

Which leads to the ultimate source for your answer, which is the IRS
itself. You can find the contact information for your local tax office

Only the IRS can tell you for certain whether a deduction is allowable. 

I hope this helps! If you feel that this has answered your question
(to the extent that anyone outside of the IRS can answer it), please
let me know so that I may post it as the formal Answer to help you
close this question.


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