Use of images by charities

[bobatkins]

Anyone have any comments/experience on allowing images to be used by

charities, i.e. Nonprofit 501©3 entities?

 

I believe I once read somewhere that if you give away your work to a

charity (or anyone else), you've established a zero value on it, so

if it's then illegally used by someone else or for some other purpose

you've basically shot yourself in the foot when it comes to legal

claims. Anyone know if that's true?

 

I know you can't take a tax deduction for the "value" of the image,

but is there any sort of win/win arrangement for both charity and

photographer apart from feeling good and getting a photo credit!

[blueworldstudios]

Although I'm not a lawyer and don't play one on the internet, I just can't possibly see this

being the case. The licensing agreement between you and any particular client cannot

dictate your future ability to license your work or protect your properly copyrighted work. I

can see this if you have released this image with a public domain license of some sorts, or

if you have consistently failed to protect your in interests for a period of time.

 

To be safe, I would definitely treat this licensing as any other, with a delivery receipt and

terms of use, and charge something for it, even if it's only a $1.

[jbq]

I'm not a lawyer either, but I don't see why that would be the case. I'd like to hear more about this.

 

If there is indeed an explicit issue about the image being licensed for free, who about licensing it for $1 (or whatever is the minimum value is, assuming it's small enough)? Or, can you do a tax-free donation to the 501©3 with the exact same value as the licensing fee?

[marshall]

Seems like the safest way to protect the value of the image would be to invoice for it, noting the original value clearly on the invoice and noting that you are giving it as a donation instead of a zero-dollar license. Billing $1 sounds like establishing that as the value. Either way, I've never heard that donating services or products eliminates the future value, legally. But I am not a lawyer or expert in non-profit contracts...

[bobatkins]

I'm not a lawyer either, which is why I'm asking! When it comes to the law, common sense doesn't always apply.

 

I suppose you could charge $500 (which would be a typical licence fee), then donate the $500 back to the charity, but it does complicate the paperwork and legally those transactions need to be reported on your taxes (more paperwork...).

 

I'm just wondering if anyone here has negative experiences in this area. Are there things to be careful about, or can you just go ahead and say, "sure, you can use the image".

[qtluong]

This just doesn't make sense to me. In the right-managed model, the licensing value is determined by the use of the photograph, so different uses will have different values. For registered images, statutory

damages are about copyright violation and are more or less a flat fee ($150,000) that has little to do with the value of the image. As a reminder many have learn the hard way that legal claims are not practically feasible with unregistered images. <a href = "http://www.terragalleria.com/stock-photography.html">Terra Galleria stock photos</a>

[john_williams]

You can value the image and you can take a tax deduction. Providing a "goods or service" to a non-profit is called "probono." They will want you to place a value on the good or service provided. They will then list that contribution of goods or services on the revenue side, with an excat offsetting amount on the expense side. You can deduct the same value, within, the IRS guidelines and limits of course, as a "charitable donation."

[bobatkins]

Are you certain about that?

 

My understanding was that you CANNOT deduct what you think the fair market value is, only the ACTUAL value, i.e. the material cost of your donation. So if you give them an 8x10 print you can deduct, say, $5 for the cost of the paper and the ink, but you can't deduct $300, which is what you might sell the print for in a gallery. If you allow them to use an image, there's no materials cost at all if you send it to them via email, so there's no deduction you can make.

 

If this were not true, all you'd have to do to avoid paying any taxes at all would be to make 1000 8x10 prints and give then all away to charity, value them at $500 each and take a $500,000 deduction on an actual cost of $5000. Not a bad deal, but the Feds are wise to it...

[john_williams]

Yes Bob.

 

You use the actual market value - not your cost. Wherever you heard that, it is wrong for sure. You use the value that you would otherwise sell it for. In fact, the best way you put a value on it, for their records, is to give them an invoice with your charge. On the next line of invoice you would then say something like, "less discount" and put in the same amount as the charge. In fact some providers only give a partial deduction/break on a good or service. For example, a charity could hire a banquet hall/hotel for their annual benefit dinner for 1,000 people for, say, $100,000. The banquet hall would then invoice for $100,000 and, if giving them a break, on the next line might say, "less discount" of $15,000. The net the charity pays is $85,000 and the probono amount is $15,000. Pretty routine stuff really. Happens all the time just like this.

[melissa_eiselein]

Bob: I know even less about taxes than I do photography...and you've seen how little I know about that. :-)

 

<p>That said, here's a couple things I was able to dig up:

<p>From CALCPA.org: <a href="http://www.calcpa.org/consumers/ask/2003/mm.12.22.html"> http://www.calcpa.org/consumers/ask/2003/mm.12.22.html</a>

<br><i>"You may donate artwork, jewelry, and other collectibles as well, but the rules become more complicated. To deduct the fair market value of your donation, the gift must be put to a use related to the organization's main activity or charitable purpose. For example, if you donate your prized Picasso painting to your local art museum, the painting must be used for study and appreciation within the museum for you to write off the full market value. If, instead, the museum wants to sell the painting to raise funds for a new wing, your deduction would be limited to the painting's original cost. For this reason, it's a good idea to ask the charity for a statement outlining its intended use of your gift."</i>

<p>From NYFA.org: <a href="http://www.nyfa.org/archive_detail_q.asp?type=6&qid=62&fid=6&year=2002&s=Winter"> http://www.nyfa.org/archive_detail_q.asp?type=6&qid=62&fid=6&year=2002&s=Winter</a>

<br><i>"Can an artist deduct the fair market value of a work they donate to charity? "No," says Ms. Rosen. According to existing tax laws: "BLOOD, SWEAT, and TEARS are not deductible. Most artwork that an artist still has in her or his possession carries what is called a zero cost basis, meaning that the materials used to produce the work should have been taken as a tax deduction in the year they were purchased." What this means is that in the eyes of the IRS your donated artwork is worth nothing more than the sum of its parts, i.e., the total cost of the materials that went into making it."</i>

<p>From money.CNN.com:<a href="http://money.cnn.com/2001/12/07/taxes/q_appreciated/"> http://money.cnn.com/2001/12/07/taxes/q_appreciated/</a>

<i>"You're only able to deduct your cost basis (what you paid to acquire it, or what it was worth when you inherited it) when donating ordinary income property, not its fair market value. ... One more word of caution: In order to deduct the fair market value, the item you donate must be used by the organization and cannot be sold."</i>searched the IRS.gov site. It's a confusing spiderweb of information

<p>I also , none that was very helpful--except that you don't need the photograph appraised if it's value is less than $5,000. Also, I read that you can't deduct the value of your time or services. However, I did find this tax information number. Maybe your best bet is to call the IRS directly: 1-800-829-1040. Then, I'd follow it up with a phone call your CPA to make sure you get the same answer. If not, go back to the IRS and again to your CPA until you get answers that agree.

<p>Then again, it might be a lot less work to sell the charity the photo then turn around and make a cash donation of equal value.

[john_williams]

You CAN deduct costs of your time and services. What Melissa is quoting from about is stuff about donated artwork, stocks and real estate that HAS APPRECIATED in value after the donor first acquired it. What Bob, I think, is talking about in this thread is an image/photo/print allowed to be used by a charity. If so, the value of that is what he otherwise could or would sell it for INCLUDING his cost of materials and labor etc. Snippets of info off web sites (IRS, CNN, etc) are not helpful here and are in fact being interpreted incorrectly.

[melissa_eiselein]

No need to get touchy, John. It's not like I'm giving lawyer-like or CPA-like advice and claiming to be an authority. All I did was leave snippets, along with the links to the sites, so Bob and others can go to the sites to read the information in it's entirety. As you've probably seen in the various snippets I posted, there is contradicting information. Hence, the number to call IRS for tax information. I guess I should also suggest calling a lawyer for clarification on the future value of a donated item.

[melissa_eiselein]

Then again... I think I should suggest calling three or four laywers to get a consensus. It's been my experience that lawyers often have their own (sometimes twisted) interpretation of the law, which doesn't always coincide with the judges interpretation. :-)

[bobatkins]

Well here's a further quote from the NYFA article that Melissa quoted above:

<p>

"<em>Ms. Rosen points out that the legal precedent for this was set in a specific tax court memo (Joseph Maniscalco 1978-274, Code Sec 162), which determined that "a professional artist's allowable charitable contribution deduction for their own labor was limited to her or his cost basis, which is $0." In the Maniscalco case, the artist had donated three of his portrait paintings to various charitable organizations and deducted $600 per painting, totaling $1,800. Prior to donating works, the artist had deducted on his tax returns the cost of the materials used to produce these works. In its ruling, however, <b>the court determined that Maniscalco was not entitled to a deduction for the fair market value of his paintings</b>."</em>

<p>

That would certainly seem to be totally analogous to the case of a photographer donating an image for use by a charity, and it even has the legal citation if anyone has the ability to look up (and understand!) the case. This isn't donating artwork which you have bought and which may or may not have appreciated in value, this is donating artwork which you have created. This seems to support my original belief that you can't deduct "fair market value" for gifts to charity of artwork which you have created yourself, only the intrinsic materials cost (as long as you haven't already taken a deduction for that as part of your business expenses.

<p>

I think the parallel is that you can't deduct the cost of your time if you voluneer for charity work. You can deduct the actual expenses of doing the work (e.g. driving there and back) but you can't deduct $10/hr for what you do based on what the charity would have to pay if you didn't volunteer or what you might have been paid to do similar work for a non-charity.

<p>

I don't know if John is a CPA or a lawyer, but if so I think it would be helpful if he could cite a case which supports his statements that seem to run contrary to the opinions and case law cited on the NYFA website.

[john_williams]

Melissa: My intent was not to get touchy and if that came across I am sorry it did.

 

Bob: A professional artist's labor cost or concept is not the same as a photographer's in this instance in my opinion. When an artist sells a work he/she did, they do not list out a day rate or hourly rate on the invoice (such as an invoice may be in that case). Their time is intrinsic and embedded in the selling price of the work of art. A photographer selling/donating a print etc. can easily produce an invoice for the cost of materials as well as the cost of his or her time (cost of time here meaning what they would charge to set up and take the shot and any digital processing time for that matter too I suppose). I am not CPA or lawyer and my opinion is no more valid than Bob's or Melissa's. But, I do work every day with probono transactions at a non-profit and I can only say this is my experience. Alas, a CPA and or a lawyer should be consulted of course for this particular question.

[bobatkins]

Well we do have both lawyers and CPA's here on photo.net and they have in the past contributed their (unoffical) opinions on subjects like this.

<p>

As with deductions in general, you can take whatever you want, but you run the risk of audit and penalty if you're wrong (and jail if you deliberately and knowingly tried to falsify your tax return).

<p>

As for <em>" A photographer selling/donating a print etc. can easily produce an invoice for the cost of materials as well as the cost of his or her time (cost of time here meaning what they would charge to set up and take the shot and any digital processing time for that matter too I suppose)"</em>, if the shot in question was taken in Alaska, I doubt the IRS would smile upon me if I deducted the air-fare, car rental and hotel bills for the trip. If someone said "go get me a picture of a Grizzy in Denali", they'd be looking at an invoice for at least $5000, just for my expenses.

<p>

An artist could also clearly invoice their time, since if they were commissioned to paint an artwork, that's part of what they would charge.

<p>

I've no doubt people HAVE taken all sorts of deductions they were not entitled to take, and I've no doubt that some have not been audited. However I'm pretty sure I'm right on this one and unless someone can point me to a case or IRS ruling I'm not inclined to mess with the Feds. The IRS have powers way above just about anyone else when it comes to messing with you!

[john_williams]

Fair enough.

 

Sounds good. Thanks.

[scott aitken]

Bob, I don't think that the analogy of the artist donating a painting to charity is exactly

correct. That might be the case if you were donating a fine art print for a charity auction,

for example (which I have done on occasion). On the other hand, if you are a commercial

photographer, and you donate limited usage rights of an image for the charity to use on

their brochure (or other publication), then it should be fairly easy to establish the

commercial value of a stock image for a one time print run of a brochure, which should be

an easily justifiable donation. To me that is more of an analogy of other businesses

donating products or services.

[robertshantz]

<P>Here are a few links that touch on the deductibility of donations</P>

 

<P><A HREF="http://www.irs.gov/publications/p535/ch13.html#d0e11444"> This one </A> from the IRS discusses business contributions. The relevant section is as follows:</P>

 

<P>"Charitable contributions.

 

<P>Cash payments to charitable, religious, educational, scientific, or similar organizations may be deductible as business expenses if the payments are not charitable contributions or gifts. If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. However, corporations (other than S corporations) can deduct charitable contributions on their income tax returns. See Charitable Contributions in Publication 542 for more information. Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040).

 

<P>Example.

 

<P>You paid $15 to a local church for a half-page ad in a program for a concert it is sponsoring. The purpose of the ad was to encourage readers to buy your products. Since your payment is not a contribution, you cannot deduct it as such. However, you can deduct it as an advertising expense.

 

<P>Inventory. If you contribute inventory (property you sell in the course of your business), the amount you can claim as a contribution deduction is the smaller of its fair market value on the day you contributed it or its basis. The basis of donated inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. You must remove the amount of your contribution deduction from your opening inventory. It is not part of the cost of goods sold.

 

<P>If the cost of donated property is not included in your opening inventory, the property's basis is zero and you cannot claim a charitable contribution deduction. Treat the property's cost as you would ordinarily treat it under your method of accounting. For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year.

 

<P> A corporation (other than an S corporation) can deduct its basis in the property plus one-half of the gain that would have been realized if the property had been sold at its fair market value on the date of contribution. But the deduction cannot be more than twice the property's basis. For more information on the charitable contribution of property by a corporation, see section 170(e)(3) of the Internal Revenue Code.

 

<P>Example 1.

 

<P>You own an auto repair shop and in 2003 you donated auto parts to your local school for its auto repair class. The fair market value of the parts at the time of the contribution was $600 and you had included $400 for the parts in your opening inventory for 2003. Your charitable contribution is $400. You reduce your opening inventory by the $400 for the donated property.

 

<P>Example 2.

 

<P>Assume the same facts as Example 1, except you purchased the auto parts in 2003 for $400 (not part of the opening inventory). The $400 is included as part of the cost of goods sold for 2003 but not in figuring the basis of the property. Your charitable contribution is $0. "</P>

 

<P>Thus, for the majority of photographers no deduction is allowed for the business, and corporations only get the lower of fair market value or cost basis plus 1/2 of sale value not to exceed twice the cost basis. Sole proprietors, S corporations, etc. have to use their personal schedule A</P>

 

<P><A HREF="http://www.irs.gov/publications/p526/ar02.html#d0e1324">Your time </A>is not allowed on the individual return. This is the relevant section.</P>

 

<P>"You cannot deduct the value of your time or services, including:

 

<P>Blood donations to the Red Cross or to blood banks, and

 

<P>The value of income lost while you work as an unpaid volunteer for a qualified organization. "</P>

 

<P>The basic purpose of these rules, as Bob pointed out earlier, is to prevent the deduction of something twice: once as a business expense and then again as a donation. Likewise, the ability to deduct time for which income was not received would allow almost anyone to avoid taxes altogether. Did a teacher tutor a child after school for free? Sounds like $50/hour to me. It would be great to deduct my hourly rate for everything I did that was remotely charitable.</P>

 

<P>Robert

 

 

 

[bobatkins]

Since I've sold several images for similar purposes for, let's say, $250, what's to stop me "donating" rights to an image to, let's say, 100 different charities and then claiming $25,000 in charitable deductions.

 

What's stopping everyone doing that?

 

What's stopping me is I don't much like the though of going to jail or getting hit with large IRS penalties.

 

I think we need input form someone qualified here. Taking advice from people who don't know what they are talking about (and I include myself in that group) is dangerous.

 

We'd all LOVE to be able to donate images to charity and claim "fair market value" deductions of a few hundred dollars per image, but just wanting it to be so doesn't make it so.

 

If I get any FACTS relating to this, I'll post them.

[robertshantz]

<P>Here are a few links that touch on the deductibility of donations</P>

 

<P><A HREF="http://www.irs.gov/publications/p535/ch13.html#d0e11444"> This one </A> from the IRS discusses business contributions. The relevant section is as follows:</P>

 

<P>"Charitable contributions.

 

<P>Cash payments to charitable, religious, educational, scientific, or similar organizations may be deductible as business expenses if the payments are not charitable contributions or gifts. If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. However, corporations (other than S corporations) can deduct charitable contributions on their income tax returns. See Charitable Contributions in Publication 542 for more information. Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040).

 

<P>Example.

 

<P>You paid $15 to a local church for a half-page ad in a program for a concert it is sponsoring. The purpose of the ad was to encourage readers to buy your products. Since your payment is not a contribution, you cannot deduct it as such. However, you can deduct it as an advertising expense.

 

<P>Inventory. If you contribute inventory (property you sell in the course of your business), the amount you can claim as a contribution deduction is the smaller of its fair market value on the day you contributed it or its basis. The basis of donated inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. You must remove the amount of your contribution deduction from your opening inventory. It is not part of the cost of goods sold.

 

<P>If the cost of donated property is not included in your opening inventory, the property's basis is zero and you cannot claim a charitable contribution deduction. Treat the property's cost as you would ordinarily treat it under your method of accounting. For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year.

 

<P> A corporation (other than an S corporation) can deduct its basis in the property plus one-half of the gain that would have been realized if the property had been sold at its fair market value on the date of contribution. But the deduction cannot be more than twice the property's basis. For more information on the charitable contribution of property by a corporation, see section 170(e)(3) of the Internal Revenue Code.

 

<P>Example 1.

 

<P>You own an auto repair shop and in 2003 you donated auto parts to your local school for its auto repair class. The fair market value of the parts at the time of the contribution was $600 and you had included $400 for the parts in your opening inventory for 2003. Your charitable contribution is $400. You reduce your opening inventory by the $400 for the donated property.

 

<P>Example 2.

 

<P>Assume the same facts as Example 1, except you purchased the auto parts in 2003 for $400 (not part of the opening inventory). The $400 is included as part of the cost of goods sold for 2003 but not in figuring the basis of the property. Your charitable contribution is $0. "</P>

 

<P>Thus, for the majority of photographers no deduction is allowed for the business, and corporations only get the lower of fair market value or cost basis plus 1/2 of sale value not to exceed twice the cost basis. Sole proprietors, S corporations, etc. have to use their personal schedule A</P>

 

<P><A HREF="http://www.irs.gov/publications/p526/ar02.html#d0e1324">Your time </A>is not allowed on the individual return. This is the relevant section.</P>

 

<P>"You cannot deduct the value of your time or services, including:

 

<P>Blood donations to the Red Cross or to blood banks, and

 

<P>The value of income lost while you work as an unpaid volunteer for a qualified organization. "</P>

 

<P>The basic purpose of these rules, as Bob pointed out earlier, is to prevent the deduction of something twice: once as a business expense and then again as a donation. Likewise, the ability to deduct time for which income was not received would allow almost anyone to avoid taxes altogether. Did a teacher tutor a child after school for free? Sounds like $50/hour to me. It would be great to deduct my hourly rate for everything I did that was remotely charitable.</P>

 

<P>Robert

 

<P><A HREF="www.rshantz.com"> www.rshantz.com</A>

 

 

 

[rubens_abboud]

Bob,

 

Are you donating your work because you truly want to donate it, or because the charity is asking you to donate it?

 

Charities enjoy a "business" climate that is very far from most individuals' reality. A charity might be non-profit, but they don't necessarily lack money. If you're selling your work to make a living, you still need to pay taxes -- these are costs that a charity can avoid, for example.

 

When charities "outsource" their tele-marketing campaigns to outside companies, who will annoy you at all times of the day and night, you can be sure that the tele-marketing company will not be doing their work "probono".

 

There's nothing wrong with donating to a charity. I'm not sure people realize that their work doesn't always need to be "donated" in order for a charity to use it.

 

Best regards,

 

Rubens.

[Jerry_]

The IRS has 'clout.' The person donating something from their business has 'no clout.' If the guy (or gal) running your charity has a new automobile than you do, request the charity pay $50 or $100 for your photo. Make a invoice and when it is paid, inform the charity that they can 'maybe' sell the image for a larger sum, but the 'rights' to the image are not sold. You, as a photographer, are in business, and the charity is also in business. (This area of Florida has a *****-front mission operation: the air conditioning bill would put one in arrears but they manage to pay it every month. As for them needing 'donated' photography -- I guess they can afford to buy images if they needed to.) But the IRS - with 'clout' - determines the basis of your donation .... zero.

 

 

 

If you were a dentist, and bought a painting, you could donate the painting to a charity. A invoice showing what you paid for the painting would be your proof of value. Since you are a photographer (in business or as a serious hobby,) you can donate a truck and get some tax value out of it -- but not a photograph.

[jbs]

It's Charity Bob, have a term for use and feel good about giving....;)....J