I want to share some good news from an unlikely source with all animal shelter volunteers. In June 2011, a U.S. Tax Court brought some much-needed clarity to deducting unreimbursed expenses incurred by volunteers helping IRS-recognized charities – like local animal shelters.
The case involved Jan Van Dusen, who appeared before a Tax Court judge and a team of IRS lawyers regarding a tax deduction for caring for 70 stray cats.
The court ruled Van Dusen could deduct $12,068 for expenses incurred while caring for cats for an IRS-approved charity, Fix Our Ferals (FOF). The deductions were for cat food, veterinarian bills, kitty litter, a portion of her utility bills and other items such as paper towels and garbage bags.
The decision paved the way for volunteers to deduct unreimbursed expenses that support a charitable organization’s mission, such as fostering homeless animals.
It also clarified rules for deducting unreimbursed charitable expenses of $250 or more, especially if they involve use of a home. The decision affects donors to charities and religious groups, but not political organizations.
Prior to this ruling, tax advisers often warned clients such deductions would be challenged by the IRS. The ruling informs the taxpayer how to successfully prepare for that challenge – with records of pertinent expenses and a letter from the charity acknowledging the gift.
Van Dusen, 59, is a former family law attorney living in Oakland, Calif. She lives alone in a 1,500-square-foot home in a modest neighborhood with seven cats of her own. As a volunteer for Fix Our Ferals, whose mission is to trap, neuter and care for stray cats, Van Dusen provided foster care to over 70 feral cats.
Van Dusen tried to take the deductions on her 2004 tax return, but the IRS considered them nondeductible personal expenses. In 2009, the case wound up in court. Van Dusen knew little about tax law but represented herself because she couldn’t afford an attorney.
She said her pretrial encounters with IRS agents were “intimidating,” and she felt that in court the IRS lawyers tried to portray her “as a crazy cat lady.” However, Judge Richard Morrison demonstrated considerable patience: “He had to go through all (my) receipts from Costco and ask questions like, ‘What were these paper towels used for?'”
In his 42-page decision, Judge Morrison agreed with many of her arguments. He allowed her to deduct most of some bills and half of others for care of the feral cats, ruling they were unreimbursed expenses incurred while helping a charitable group in its mission. He curtailed the total deduction somewhat because she didn’t have a valid letter from FOF acknowledging her volunteer work for expenses over $250.
There are an estimated 11 million volunteers nationwide who work with local shelters and rescue groups, and many of these volunteers spend up to $2,000 of their own money a year to help animals in need, with some spending up to $15,000 a year.
This was the first time the court had addressed these types of expenses, and this ruling set an important precedent for the many foster-care-giving volunteers in our community. Please check with your tax adviser on the impact this ruling may have on your volunteer efforts.