Crowdfunding becoming popular way to raise funds fast, but donations
are gifts and may not be deductible
Arlington, VA – May 9, 2013 – The rescue this week of three women and a child from a Cleveland home where they were held captive for a decade has gained worldwide attention. Generous donors wishing to help the victims are being cautioned by Better Business Bureau to confirm the legitimacy of all charitable fundraising and crowdfunding efforts.
“A tragedy of this nature that is the focus of high profile media attention inspires people to give,” says David Weiss, president and CEO of BBB of Greater Cleveland, “but, unfortunately, also catches the attention of scammers who try to take advantage of well-meaning generosity.”
BBB Wise Giving Alliance has seen charity scams following all recent natural disasters and manmade tragedies, and encourages donors to balance their generosity with thoughtfulness and research. “Try to avoid making emotional giving decisions,” says H. Art Taylor, President and CEO of the BBB Wise Giving Alliance, “The first request for a donation may not be the best choice. Check with the BBB to help avoid questionable fundraising efforts.”
BBB also reminds consumers that donations made through crowdfunding websites are usually considered gifts to the recipients and are not tax deductible unless the group receiving the funds is a 501(c)(3) organization as designated by the Internal Revenue Service.
BBB urges consumers to make wise choices with their donations:
- Respond thoughtfully. Take the time to check out the charity to avoid wasting your generosity by donating to a questionable or poorly managed effort. The first request for a donation may not be the best choice. Be proactive and find trusted charities that are providing assistance.
- Respect the victims and their families. Organizations raising funds should get permission from the families to use either the names of the victims and/or any photographs of them. Some charities raising funds for the Colorado movie theater and Newtown school victims did not do this and were the subject of criticism from victims’ families.
- Registration confirmation. About 40 of the 50 states require charities to register with a state government agency (usually a division of the State Attorney General’s office) before they solicit for charitable gifts. If the charity is not registered, that may be a significant red flag. For example, Ohio requires charities to register with the Office of the Attorney General before they solicit for charitable gifts.
- Results should be shared. After funds are raised for a tragedy, it is even more important for organizations to provide an accounting of how funds were spent. Transparent organizations will post this information on their websites so that anyone can find out and not have to wait until the audited financial statements are available sometime in the future.
- Retail sale disclosures. If any items are being sold (such as t-shirts, etc.) in the context that their sales will benefit the victims, look for a disclosure that states the actual or anticipated amount of the purchase that will benefit the a specified charity and, if applicable, any minimums or maximums being raised (e.g. up to $100,000) as well as campaign term limits (e.g. during the month of May).
- Remember Online Giving Cautions. Never click on links to charities on unfamiliar websites or in texts or emails. These may take you to a lookalike website where you will be asked to provide personal financial information or to click on something that downloads harmful malware into your computer. Don’t assume that charity recommendations on Facebook, blogs or other social media have already been vetted. Also, websites that enable individuals to raise funds (known as crowd funding sites) can be established very quickly but may not have oversight procedures in place to ensure that funds will be used as promised (for example, establishing a CPA, bank or other respected third party to receive collected donations and help distribute funds to victims).
- Review BBB Charity Reports. Find out if the subject charity meets the 20 BBB Standards for Charity Accountability. Visit give.org for reports on nationally soliciting charities and bbb.org for information on regionally soliciting organizations.
The Cleveland Foundation has set up the Cleveland Courage Fund for the victims. The organization is a community foundation that has been supporting various Cleveland area projects since 1914.
BBB Wise Giving Alliance is asking anyone who receives a suspicious charitable solicitation to report it to BBB Report a Scam.
ABOUT BBB WISE GIVING ALLIANCE: BBB Wise Giving Alliance produces reports on over 1,200 nationally soliciting charitable organizations, and local BBBs report on another 10,000 local and regional charities. BBB Wise Giving Alliance does not rank charities but rather seeks to assist donors in making informed judgments by providing objective evaluations of national charities based on 20 standards that address charity governance, finances, fund raising, appeal accuracy, and other issues. The outcomes of the evaluations are available online at give.org. BBB Wise Giving Alliance is an affiliate of the Council of Better Business Bureaus.
ABOUT BBB: For more than 100 years, Better Business Bureau has been helping consumers find businesses, brands and charities they can trust. In 2012, consumers turned to BBB 124 million times for Business Reviews on more than 4.5 million companies and Charity Reports on 11,000 charities, all available for free at bbb.org. The Council of Better Business Bureaus is the umbrella organization for 113 local, independent BBBs across the United States and Canada, as well as home to its national programs on dispute resolution and industry self-regulation.