Community Benefit

Income Tax Assistance Program

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: Our hospital participates in the Volunteer Income Tax Assistance (V.I.T.A) program with the IRS, a free tax preparation program open to individuals and their families who earn less than $46,000 a year. The hospital is a site and co-workers (salaried and hourly) sign up each year to be part of this valuable service. Over the years we have returned more than a $1 million dollars to community residents. We estimate that participants would pay an average of $300 to a professional tax preparer. In addition, we encourage the participants to open checking/savings accounts with their refunds and offer classes throughout the year on how to manage their money, save, spend money wisely and more.

We feel that this service should count as a community benefit. What category should it fall in and if counted, would it be reasonable to count the value of the service (say $50 for each EZ form)?

Recommendation: Your organization is providing a valuable service by helping low-income persons accurately prepare their tax returns. We recommend it be reported as "Community Building" in the category of "Community Support" We further recommend that your organization determine — to the extent possible — the actual cost to the organization for providing the service, for example, the employees' time if they participate on paid time. If your employees are not participating on paid time, then calculate the administrative expenses incurred to coordinate this activity. We do not recommend reporting what you might have charged. Community benefit equals actual expense not lost opportunity costs.