Pass-Through Charitable Fundraising
The following information applies only to subordinate units in the United States.
Monetary donations to subordinate units of the Knights of Columbus (councils, assemblies, and chapters) are not ordinarily tax-deductible. However, the Internal Revenue Service permits a narrow exception to this general rule, which is codified at Section 170(c)(4) of the Internal Revenue Code. Pursuant to Section 170(c)(4), a council, assembly, or chapter may collect multiple individual donations, deposit them into a dedicated bank account, and then send a check for the cumulative amount to a charitable entity that is recognized by the IRS under Section 501(c)(3). This is known as “pass-through charitable fundraising”.
Donations made in this manner may be tax-deductible by the individual donors as charitable contributions under certain conditions and restrictions, including the following:
The subordinate unit collects the donations and deposits them in a separate bank account, insuring that the funds are totally segregated from any and all other funds of the council or assembly.
The subordinate unit passes the accumulated donations directly to an entity that is recognized as a charity under Section 501(c)(3).
The funds are not used in any manner for any social or fraternal purposes, including payment of expenses incurred in hosting the fundraising event.
Only individual taxpayers, not non-person taxpayers (such as corporations or partnerships), are eligible to claim a tax deduction.
Councils, assemblies, and chapters may not issue receipts for donors who have made monetary contributions to a charitable entity. Rather, the council, assembly, or chapter should provide the charitable entity that received the donations with a list of all donors’ names and addresses, along with the amount of their respective donations; the charitable entity may then issue receipts and letters of acknowledgment that the donors may retain for tax purposes.
Subordinate units that wish to utilize pass-through charitable fundraising should refer to Guidelines For Charitable Fundraisers on the Officers’ Desk Reference.
Subordinate units that wish to utilize pass-through charitable fundraising should also establish a separate bank account, which may be designated as “[Council/Assembly] [No. xxxx] Charity Account”.
Finally, we strongly advise councils and assemblies to retain the services of a competent accountant to ensure compliance with Section 170(c)(4).
*Unless otherwise expressly stated, the guidance set forth in the Officers’ Desk Reference does not constitute tax advice on which any individual member of the Knights of Columbus or any subordinate unit may rely in determining his or its obligations and liabilities under the revenue laws of any jurisdiction. Council and assembly officers are responsible for ensuring compliance with all applicable tax laws and regulations and the accuracy of all returns filed with any taxing authority. To this end, we encourage all subordinate units to consult with a competent tax advisor if they have any questions or concerns about their obligations and liabilities under the revenue laws.
Rev. February 2023