If there is a cause or activity you are passionate about, agreeing to serve on the board of an organization that supports your special interest might be a great idea.
For example, if your family is active in league and youth sports, you may want more say in running a program. If a loved one passed away from a particular disease, you might want to serve on a board that supports research and care for that illness. Colleges, hospitals, churches and other nonprofits all need the support of board members to continue operating, and there is probably an organization out there that can use your help.
Being a board member can offer some benefits not often considered. First, you will have the opportunity to form lasting friendships with people who share your interests. Imagine meeting people who are also concerned about the environment, social justice, the arts in schools, or animal welfare. Wouldn’t it be refreshing to spend time with those who also want to educate the world about a particular medical condition or societal problem? Board members can grow close, working side by side for a common goal.
Also, you may be able to use talents that you might not use in other aspects of your life. For instance, although I am an accountant, I decided long ago to never serve as a treasurer. (I deal with numbers all day!) Instead, I love planning parties and talking to donors about gift planning, so I am clear and upfront that those are my interests before joining a board.
Before you decide to jump in and give your time and expertise, there are financial and tax consequences to becoming a board member that should be considered before accepting a position.
Minimum donation
First, you will probably be asked to make a minimum donation, which could be from a few hundred to tens of thousands of dollars. Make sure you know the minimum donation amount and have the resources available to make at least the minimum gift without causing harm to your finances.
Potential liability
There is some potential financial liability to serving on a board. Not to scare you, but even though a charity may not owe income taxes, nonprofits that have employees still have to pay payroll taxes. As with any employer, if the charity doesn’t pay, the IRS can go after the individual officers, directors, or check signers responsible for the tax payments. Also, ask your insurance broker to review the organization’s commercial insurance policy and make sure they have coverage for board members, called directors and officers (D&O) insurance.
Compensation
You will probably not be paid for your time. If you want to make sure that individuals will not profit off your free labor and that your time will go to a financially sound, well-run nonprofit, go online and search for the organization’s Form 990. It is public information that will provide you with a picture of a charity’s finances and key individuals’ compensation. If Form 990 is not available online, ask the organization’s executive director for a copy and make sure it was filed with the IRS.
Your time is valuable, so make sure you can afford to donate time to the organization. The charity should be able to provide you with a meeting schedule and estimated time required to determine if you are not too busy to serve. If you do not have much free time right now, it might be good to join later when you have less going on or when you retire. (I have a list of boards I would like to join if I ever retire.)
If you are looking to serve on a board to market your business or to advance your career, there are probably better ways to spend your time to meet those goals.
Unfortunately, you cannot write off the time that you donate. However, you may be able to write off your contributions to the organization and many expenses relating to your volunteerism.
Tax deductions
Mileage to and from board meetings and events is deductible at 14 cents per mile. Materials, like bats donated to a little league team, uniforms that you would not normally wear on the street, office supplies, and other non-cash items, like food for feeding the homeless, and costs you incur may also be deductible. The meals you pay for on behalf of donors (not your own) and travel for the benefit of the charity are often deductible.
Any charitable deduction of $250 or more needs to have official documentation from the charity. Written documentation from the charity should include a description of the nature of the services you performed and the need for related expenses to be paid, a detailed list of the out-of-pocket costs incurred, and preferably copies of all receipts. The charity must also provide a description and a good faith estimate of the value of any goods or services provided to reimburse the volunteer.
Charitable deductions are generally only deductible if you itemize on your tax return. Review with your tax professional what you can deduct on your return, including tax law changes for 2022. Also, ask them about the benefits of “bunching” your charitable deductions.
More than 1.5 million nonprofit organizations are in the United States, enough for almost any interest. If you think board membership might be a good idea, look to the Facebook groups you belong to, the activities you and your family already enjoy, and which organizations you already contribute to regularly. If you have the resources and the organization is worthy, offering your time and energy to a nonprofit is highly recommended.
Michelle C. Herting, CPA, ABV, AEP, specializes in tax planning, trust administrations, and business valuations. She has three offices in Southern California.