Proposal could allow tax-deductible gifts to La Jolla Shores Association — sort of
La Jolla Shores Association (LJSA) is considering options it hopes will boost its revenue generation, by allowing La Jollans to donate in support of the organization on a tax-deductible basis.
According to a proposal from LJSA Chair Nick LeBeouf presented at the group’s Oct. 14 meeting, such a boost in revenue could be made possible with his recommendation that LJSA enter a contractual relationship with the nonprofit-supporting group Mission Edge. LeBeouf said Mission Edge could help LJSA raise revenue using its 501(c)(3) tax-exempt status, which unlike LJSA’s 501(c)(4) designation, allows for tax-deductible donations.
The idea, LeBeouf suggested, is that individuals would be more willing to donate if they knew their donation was tax-deductible.
As part of the agreement, Mission Edge would handle the required accounting while receiving a cut of donations.
“This is something that I think would be good for the community,” LeBeouf said. “It would be good for our association. Unfortunately, if you don’t have money, you can’t do anything.”
LJSA is prevented from receiving tax-deductible donations because of rules pertaining 501(c)(4) organizations, often referred to as social welfare organizations. Groups classified as 501(c)(3) organizations — typically charitable organizations — can receive tax-deductible donations, and that’s where LeBeouf believes a fiscal sponsorship from Mission Edge would benefit La Jolla Shores.
Under preliminary terms of the proposal, Mission Edge would be entitled to a 9 percent share of donations, LeBoeuf said. LJSA isn’t the first local group to consider a fiscal sponsorship with Mission Edge, he added.
“The La Jolla Shores Business Association received an approval, and I believe they’re going to be voting on if they want to move forward with this at their meeting this week,” LeBeouf said.
While no decision regarding the proposal was made at LJSA’s October meeting — LeBeouf recognized the members’ desire to further examine it and decided to hold off any vote until the group’s November meeting — the brief discussion revealed some difference in opinion. At least a couple of members appeared to support the option, at its face value at least, wondering why the organization would not accept the opportunity to better fund its efforts.
Fellow LJSA member Tim Lucas didn’t see the proposal in such black-and-white terms, expressing concern that it could be pushing the boundaries of using the tax code to LJSA’s benefit.
According to May Harris, founder of For Purpose Law Group, said partnerships between 501(c)(3) and 501(c)(4) groups are perfectly legal, if handled correctly. But she said caution must be taken any time a fiscal sponsorship is considered between the two, as a 501(c)(3) runs the risk of losing its tax-exempt status if any money it grants to a social welfare organization goes toward purposes not in line with restrictions on the 501(c)(3) group.
“There are different models of fiscal sponsorship, but no matter what model you choose, the activity of the sponsored organization, or association or group, has to be capable of achieving designation as a 501(c)(3) on its own, if it went out and got it on its own,” Harris said.
As an advisory group to the San Diego City Council, the San Diego Planning Commission and other agencies responsible for implementing the La Jolla Shores Planned District Ordinance, LJSA would have to ensure money it received through the deal with Mission Edge doesn’t go toward what qualifies as significant lobbying activity.
LeBeouf said he doesn’t foresee any issues with the proposal that would compromise either organization’s tax-exempt status. Although he said he is also working to set up a formal presentation from Mission Edge to the LJSA membership at its next meeting, so clarity can be provided on any questions or concerns.
“That is absolutely nothing that La Jolla Shores Association would ever be a part of,” LeBeouf said. “We’re a community forum for the La Jolla Shores Planned District Ordinance and helping implement the processes that help maintain the character of La Jolla Shores.”
Funds raised from donations in such partnerships are always to be controlled by the 501(c)(3) before being granted to the partnered 501(c)(4), Harris said, meaning that if LeBeouf’s vision for the sponsorship comes to fruition, LJSA supporters would donate to Mission Edge on a tax-deductible basis before Mission Edge could grant funds to LJSA.
LeBeouf is planning for the next discussion on the proposal to be held at LJSA’s 6 p.m. Wednesday, Nov. 11 meeting in the Martin Johnson House on the campus of Scripps Institution of Oceanography.
• ON THE WEB — La Jolla Shores Association: ljsa.org