Can I deduct this amount from my personal income taxes?

[baraneo01]

I am the CEO of a new 501c3 public charity with tax exempt status.  I used personal income as salary support. Can I deduct the amount from my personal income taxes?

[TomYoung]

What do you mean by "salary support"?  Who is getting this "salary support"?

[baraneo01]

thanks for you help.  I'm used my personal income to support my partner, the COO of the foundation.

[TomYoung]

Now explain the "partner" aspect.  You just haven't made clear what's going on here.  Are you making a contribution to the charity, or what?

[Opus 17]

You need legal advice.

One of the biggest issues with charities and the IRS is self-dealing.  For example, if your other job is as a printer, and you as CEO decide the charity needs some printing done so your hire yourself, that can be a real problem.

In an established charity, let's imagine you donate money to the charity general fund and the treasurer or comptroller gives you a receipt.  Then, separately there is a board of directors that votes on what your salary should be.  And during this vote, you (a) recuse yourself and (b) keep confidential the fact that you are a major financial donor.  That might be ok with the IRS since it's all hands-off.

But where you control the charity, and you control your own salary, the idea of donating money to yourself, so that you pay taxes on one end and deduct it on the other end, is at the very least a huge conflict of interest.

Until you have strong internal financial controls and some independent financial oversight, you might be better off making no donations and taking a smaller salary.  But as I said, you need legal advice. 

[Opus 17]

I wrote the above before I saw that you were helping to pay someone else, but the same principles apply.  What sort of independent financial controls exist?  Who decides what the COO's salary should be?  Is there a board of directors that could in theory fire your friend the COO and hire someone different, and would you still make the same size donations?  Without strong independent oversight, it could look to the IRS like you are claiming a tax deduction for giving money to your friend.

[baraneo01]

This is really helpful, thanks.  I agree with you on the perception issue.  There is a board with theoretical control over hiring and firing and have agreed to my salary and the COO's.

[Opus 17]

You may be ok then.  But it would not hurt to get a legal opinion.  Even something like telling the board "if you hire my friend I'll cover half his salary" could be construed as improper by the IRS.

[Opus 17]

Anyway, you can deduct any charitable contribution for which you have a receipt from a registered exempt organization.  It's what happens IF you (or the organization) are audited that is when the problems potentially start.  Or if a faction of donors or employees get together and start looking for ammunition to force you out.  

(It's like this sort of; a male pastor should never counsel a female parishioner alone in his office; he should be in a conference room with windows and at least one other female staff member on the property.  Not because the pastor will do something inappropriate, but because a false accusation can destroy the organization just as effectively as a true one.  You need to apply the same thinking to your financial decisions.)

[baraneo01]

Thanks, Opus.  I'll seek advise.