According to my Facebook feed, Saturday was the Loveloud Festival in Salt Lake. Now in its second year, Loveloud is meant to provide love and acceptance for LGBTQ+ kids. If you’ve followed my #MutualNight posts, you can probably guess that, even if I lived in Utah, I wouldn’t have gone. I’m 100% behind the festival’s message and its goals, but I’m not a big fan of its music.
I am, however, a big fan of charitable organizations. And guess what? The sponsoring organization of the festival is the Loveloud Foundation, a tax-exempt public charity.[fn1]
Now I don’t know a lot of details about the Loveloud Foundation; it received its tax exemption last year, and hasn’t filed a Form 990 yet. (Next year it will file the form, which is a public document.) But there are a couple broad things that we know about it just by virtue of its being tax-exempt. So let’s have a Q&A explainer!
Loveloud is tax-exempt? Awesome! Does that mean that I can deduct the cost of my ticket on my taxes?
No. (I mean, almost certainly no: I’ll give one caveat in a second.) The tax law includes a quid pro quo rule. In a nutshell, that means that you can’t deduct amounts you give to a tax-exempt organization to the extent you got value in exchange. So if you donate $32 to your local NPR affiliate, you can deduct $32.[fn2] If you donate $32, though, and get this Classic NPR Tote (cost: $32), you don’t get a deduction. The tax law treats you as having bought the tote.
If, however, you donate $100, and you get the tote, you do get a charitable deduction. Specifically, you get to deduct $68, or the difference between the fair market value of the tote and the amount you gave.
A quick search says that tickets started at $20. If you bought a general admission ticket for $20, you got $20 worth of value in exchange. (Note, too, that the tax law looks at objective, not subjective, value. So maybe you’re like me, preferring contemporary jazz to power pop, and you only went because you didn’t want your teenager to go alone. Subjectively, the experience is only worth $10. Nonetheless, because the fair market value of the ticket is $20, you’re getting $20 of value.)
So here’s the caveat: if you bought one $20 ticket, only got the benefits of that $20, but gave $100, presumably you can deduct $80.
I heard [one of the musicians] disparage President Trump. [N.b.: I wasn’t there. I’m totally making this up—I have no idea if the performers were political, or what their politics are.] Does that mean that Loveloud should lose its exemption?
Again, nope. Tax-exempt organizations aren’t allowed to endorse or oppose candidates for office, but Trump is a sitting president, and is fair game for criticism.
But he’s filed paperwork for 2020!
That actually raised some questions when it happened, but here there’s probably still no issue. The question becomes, who speaks for the charity. Arguably, I guess, if Dan Reynolds was speaking in his capacity as a board member (I assume he’s a board member) of the Loveloud Foundation, there could be a problem. But Tegan or Sara? They almost certainly don’t, and their remarks wouldn’t be attributed to the Loveloud Foundation. In fact, the IRS has a revenue ruling that goes through 21 situations where this prohibition might or might not apply.
OK, but what about lobbying? Loveloud wants a better world for LGBTQ+ kids; what if they use proceeds from the festival to encourage Utah legislators to provide funding for LGBTQ+ education/housing/etc.?
Good on Loveloud. Tax-exempt charities are allowed to lobby, and they do it all the time. Any lobbying should be related to Loveloud’s charitable mission, and it can’t constitute a substantial part of Loveloud’s activities, but otherwise, I certainly hope it’s doing some lobbying.
Could Loveloud pay the bands that were performing?
Frankly, I don’t know if the bands were paid or not. I kind of hope they were—musicians deserve to be compensated for their work. (OTOH, if the bands wanted to donate their time, that’s also cool.[fn3])
And even if the bands performed for free, I assume there was security. And someone at the sound boards. And someone running the lights. And probably first aid. And all sorts of other people who make a living doing things at festivals. And they can definitely be paid.
There’s one major limitation: a tax-exempt organization’s profits can’t inure to the benefit of any individual. In essence, that means that it can’t distribute its profits to any individuals. It can pay employees a fair wage for their work, though.
So is there any other relevance to Loveloud’s sponsor being a tax-exempt organizations?
Probably, though I can’t think of anything else important right now.
Loveloud says that it met its goal, raising more than $1 million for LGBTQ+ youth. And that’s absolutely wonderful: I applaud Reynolds and the Loveloud Foundation for their work improving the world, and I’m happy for all of my friends and family who went and enjoyed themselves. And I love that they’ve adopted a charitable form to do it, and look forward to the Form 990 next year!
[fn1] A quick note for those who care: in spite of having the word “foundation” in its name, the Loveloud Foundation is a public charity, not a private foundation, which matters both for regulatory reasons and for deductibility reasons.
[fn2] Assuming, of course, that you itemize and otherwise qualify to take itemized deductions.
[fn3] Though note that you can’t take a charitable deduction if you contribute services to a charity. You can only deduct money donations and the fair market value of property donations.