Community Benefit

Community Benefit or Community Building Donations

Please Take Note: The information provided does not constitute legal or tax advice. The material is provided for informational/educational purposes only. Please consult with counsel regarding your organization's particular circumstances.

Question: We contribute to a number of community organizations and programs. For example, we support neighborhood cultural centers and the library, give scholarships to local private and charter schools, give donations to city arts programs, and donate to regional hospitals. Do you recommend reporting these as community benefit?

Recommendation: We recommend reporting as a community benefit donation expensed when:

  • The funds are being used for an activity that meets the definition of community benefit, including being provided in response to community health need, and
  • The funds are restricted by your organization for use as a community benefit activity. According to IRS rules, a letter accompanying the donation must specify its use as a community benefit activity, such as a clinic for uninsured.

We recommend reporting as community building expense when:

  • The funds are being used for an activity that is consistent with the definition of community building, including being provided in response to community health or safety need, and
  • The funds are restricted for this use. According to IRS rules, a letter must accompany the donation specifying its use as a community building activity (most likely scholarships for low-income students could fit here).
  • Donations for community building programs  must be reported in the relevant community building category and not under the Community Benefit cash and in-kind contributions category.

We recommend not reporting as either a community benefit donation or community building donation when:

  • The contribution is primarily for public relations/marketing reason, or
  • The contribution is not related to a community health need, or
  • The contribution is not used for an activity that meets the definition of community benefit or community building.

(Updated November 2015)