Staying Tax-Exempt: Avoiding Pass-Through Payments to Individuals

As a general rule, a donation to a 501(c)(3) nonprofit charitable organization may be tax-deductible, while a gift to an individual is not tax-deductible. Donors and 501(c)(3) nonprofit organizations may not skirt this rule by passing payments from donors, through the 501(c)(3) nonprofit organization, to specific individuals. An organization that participates in this type of transfer — called a “pass-through payment”
— on a regular and ongoing basis is at risk of losing its 501(c)(3) tax-exempt status.

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