In most cases, yes! As long as the funds are transferred into your Open Collective account in a timely manner (30 days). Please note, that most of the time, donations not made on the Open Collective platform will not receive the tax-deduction. For more details, please review our Outside Accounts Policy.
As laid out in our Terms (Exhibit A, no. 6), when you receive funds outside of the platform, you must immediately transfer them to your account with Open Collective Foundation. Please let us know when you do so, and we will then manually add the funds to your budget. You cannot hold funds outside of your budget at any time.
Since we are a charity, we are not allowed to "earmark" incoming funds for a specific individual. This means that fundraisers meant only to support a specific individual, like many you would sometimes see on a platform like GoFundMe, are not compatible with the rules of the IRS.
That said, Collectives may raise funds for a general purpose, for example supporting people in a community affected by a storm or forest fire, and then support those individuals that are part of what we call an "indefinite charitable class" - an indefinite (i.e., limitless, though not necessarily infinite) number of people in need of support.
Some related notes:
- An individual's story can serve as an example recipient, but it should be clear that funds are going into a pot of funds for hardship relief (for example), not just for that person
- Collectives can also facilitate direct relief from a donor to a recipient in need, as long as the funds are never in the Collective or OCF's hands. In this situation, it should also be made clear that we cannot offer a tax receipt or tax-deductibility
This question must be answered in several parts:
- 1.Earned income from goods or services provided is never tax-deductible for the contributor/payer who is receiving the goods/services. Only donations to charities are tax-deductible, because nothing is received in return.
- 2.The Open Collective platform is generally not useful for e-commerce (selling goods). Additionally, such activity may be seen as taxable income by the IRS. Thus, we recommend selling things outside of the platform as an individual and then donating the proceeds to your Collective. Selling goods is generally not a charitable activity anyway.
- 4.OCF Collectives may provide services in exchange for money as long as those services are at the core of the Collective's mission, charitable in nature, and fit within OCF's mission and values. No side hustles! These should only be close to the core of what you do.
- 5.To receive earned income for a service program through the Open Collective platform, Collectives should set up a new Tier named after the program, selecting the "Payment receipt" option. Only earned income should be received through that Tier.
The OCF Payment Receipt, unlike the Donation Receipt, reads as follows:
While Open Collective Foundation is a 501(c)(3) nonprofit, goods and services may have been provided in exchange for this payment, and it may not be tax deductible. Consult your tax advisor if you have any questions about the tax deductibility of this transaction.
Collectives may sell products or services through a distinct and separate outside entity where the proceeds are then donated to a Collective under OCF (as long as buyers are made aware that their purchase is not a direct donation and isn’t tax deductible, and that the Collective and the outside entity are separate and distinct).
On a related note, just doing something for free does not on its own make an activity charitable. The activity must have a broader goal in terms of impact and public benefit in order to be considered charitable activity.
OC Foundation does not currently have support for these types of partially-deductible donations.
Items with no meaningful monetary value (e.g. stickers or pens), may be given to donors in return for a donation. Other items may be given to donors as long as they are also given to other community members free of charge, independent of whether or not they donated.
Due to state-by-state regulations and significant reporting requirements, OCF's Collectives cannot run raffles.
The overall impact of the project needs to benefit an indefinite number of people - not only 'members'.
Ping us! We often receive money into our bank account without any indication of where it should go. (This is why it's so important to include the name of the Collective on any correpondences/checks/transfer that gets sent to OCF). We don't use/disperse that money anywhere, it just sits in our account until someone claims it, so just send us a message (in slack or email) with screenshots/receipts that include the dollar amount & the Collective name, so that we may get your funds to you.