October 4, 2001 | Read Time: 2 minutes
Disaster-relief charities, including those formed to help victims of the September 11 attacks, need to be careful about whom they aid and under what circumstances in order to qualify for tax-exempt status, the Internal Revenue Service warned in new guidelines.
The IRS had been planning the guidelines for some time, but released them ahead of schedule because of the terrorist attacks.
In other disaster-related actions:
- The IRS said it would speed processing of requests for tax-exempt status from new charities formed to assist attack victims. New organizations should file Form 1023 and write at the top of the form “Disaster Relief, Sept. 11, 2001.” Until a group gains tax-exempt status, contributions to it are not deductible.
- The service extended deadlines for charities that have been affected by the attacks, giving them at least six more months to file their Form 990 informational tax returns, and granting a similar extension for income-tax returns filed by relief workers who are helping out in the crisis.
In the new guidelines for disaster-relief charities, the revenue service explained not only what new charities need to do to comply with tax laws but also how people or companies can donate to existing groups. The publication outlines what types of aid are permissible. The IRS also said that long-term aid, such as scholarships for dependents of disaster victims, must be based on need that exists at the time the grant is made, not on short-term financial difficulties that existed immediately after the disaster.
In addition, charities cannot give aid to people who cannot demonstrate a specific disaster-related need, the guidelines said. For example, a charity may supply shelter only to victims who were actually displaced by a disaster.
That means that charities may need to act fast if they want to help some of those affected by the September 11 attacks, according to Marc Owens, a Washington lawyer who formerly directed the service’s Exempt Organizations Division. A charity may determine that a family qualifies for short-term aid immediately after the World Trade Center attack. However, once a family receives insurance and other payments, it may no longer be eligible for charitable aid, Mr. Owens explained.
The guidelines are contained in a 10-page booklet, “Disaster Relief: Providing Assistance Through Charitable Organizations,” which is available online at http://www.irs.gov/relief/aid-charity-pub.pdf.
