State of Minnesota
More about
Attorney General
Lori Swanson


Minnesota Attorney General's Office

1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101

(651) 296-3353
(800) 657-3787

M - F 8 am - 5 pm

TTY:(651) 297-7206
TTY:(800) 366-4812

Charities - Avoid Shams and Scams

Nonprofit…charity…tax-exempt. Minnesota is fortunate to be a state with generous citizens who open both their hearts and wallets to charitable causes. Most charities in Minnesota do great work and are careful stewards of their resources. This column is designed to provide tips to make sure that when you give a charitable gift, your money is being used as you intend.

Sham Charities. Be aware of sham charities and charities scams. Some unscrupulous individuals seek to prey on the generosity of Minnesotans by soliciting cash donations, vehicles, goods and loans for so-called charitable organizations that give little or no charitable assistance. By learning about potential scams and taking the time to research an organization, you may be able to avoid losing money to a sham charity and ensure that your money goes to the charitable causes you support.

Vehicle Donations. The ability to receive a tax deduction for a used vehicle while helping a charity makes vehicle donation an attractive method of giving. Sham charities, however, may actually use vehicle donations to raise money for the individuals who run them, not charitable purposes. Organizations may advertise that they use donated cars to provide services, such as helping disadvantaged persons get to medical appointments, only to sell the cars or their parts and pocket the money. The Attorney General’s Office stopped a “charity” that received and sold donated cars, using little, if any, of the proceeds for charitable programs or services. For more information, a publication titled Cars for Charity: A Guide to Vehicle Donations is available from the Attorney General’s Office.

Loans and Investments. Be skeptical if you are asked to make an investment in, or loan money to, a charity. Because of their nonprofit and tax-exempt status, charities can't be formed to give private benefits, such as high rates of return, to individuals. These arrangements may seem attractive because they appear to allow a donor to earn a profit while helping out a charity. Such schemes rarely work out as planned, however, and persons investing money they can't afford to lose may find themselves in financial distress. The Attorney General's Office stopped a private foundation that solicited investments from individuals structured as "loans" to the foundation with rates of return as high as 72%. The foundation invested the funds in risky foreign investments through an "investment manager," who later claimed the funds were "unavailable." Be wary of any organization, charity or not, making offers that are "too good to be true." Diligently research any investment.

Telephone, Internet and E-mail Solicitation. In the past, this Office received calls from citizens who were solicited by phone for organizations such as the Red Cross, United Way or Salvation Army to aid in relief efforts for Hurricane Katrina victims. In actuality, the calls were not made by these organizations, but scammers who were seeking to obtain credit card or other personal information to commit identity theft. To avoid such scams, always ask the charity that is soliciting you to send you information in the mail before you make a pledge and investigate the charity before giving. If you want to donate electronically, don’t respond to an e-mail or the website that is sent to you, but locate the legitimate website and give through it.

Sound-Alike Organizations. Scammers may attempt to lure donors with an impressive sounding name or a name similar to a well-known charity. They prey on the public association with the well-known charity and rely on donations from uninformed donors who respond to unsolicited phone calls and mailings without sufficient research. In 2005, a man was convicted in federal court on twelve counts of mail fraud for diverting nearly $500,000 a year from well-known organizations such as The American Cancer Society and The Arthritis Foundation, by using similar business names and 1-800 phone numbers to take donations. Callers trying to donate to The Arthritis Foundation confused that organization with the bogus National Arthritis Association and were told by telemarketers that the fictitious organization was somehow affiliated with the legitimate charity.

Charitable Giving Tips. The Minnesota Attorney General’s Office offers these basic guidelines for charitable giving:

  1. Research the organization before donating. You can obtain helpful information by viewing charity registration documents at the Attorney General’s Office or through our website at www.ag.state.mn.us. Those documents, typically a charity’s IRS Form 990, provide contact and financial information in areas such as a charity’s contributions, expenses and program services. The Attorney General’s Office can also provide you with contracts and campaign finance reports for professional fundraiser's, so you can determine what percentage of your donation is going to charity; you may be surprised at how little the percentage can be. You can always ask the charity how it will use your gift and how much of your donation is going to a professional fund-raiser. Finally, if it is important to you that your donation is tax deductible, check with the IRS by calling its tax exempt hotline at 1-877-829-5500 or searching Publication 78 on its website at www.irs.gov.
  2. Be cautious about how you make your donation. Cash contributions are easily lost or stolen and do not leave donors with proof of their contribution. Always pay by check or credit card, and make your check payable to the charity. Never provide your credit card information in response to an unsolicited phone call or e-mail. Find the contact information for the charity you wish to donate to and contact it yourself. If you are donating over the Internet, enter the URL yourself instead of clicking on a link provided by someone else, and be wary if the domain name is hidden, is not familiar, or is not the same as the text of the link. Finally, always ask for a receipt for your tax records.
  3. Do not feel pressured by emotional appeals or urgent requests for donations. A reputable charity will appreciate your donation just as much if you take time to research the donation first. You should not feel obligated to donate to a charity that sends you unsolicited greeting cards, address labels or other unordered merchandise. Don’t fall for a solicitation that encourages you to donate to claim a “guaranteed prize.” Charities cannot require a donation to be entered into a sweepstakes. Don’t believe that donating to a law enforcement or firefighters’ organization will give you special protections or allow you extra privileges like getting out of speeding tickets. If you want your donation to go to your local law enforcement or firefighters, call them to see if they receive funds from the organization soliciting you.
  4. Know your rights. Under Minnesota law, a charity must do the following before requesting a donation: (1) identify itself by name and location; (2) tell you whether or not the contribution is tax-deductible; and (3) provide a description of the charitable program for which the solicitation campaign is being carried out. A professional fund-raiser soliciting on behalf of a charity must disclose its full name and the fact that the solicitation is being conducted by a professional fund-raiser. These requirements apply to mail, phone and in-person solicitations. If you haven’t been told this information, ask for it.

For more information, or to file a complaint about a charity, contact the Minnesota Attorney General’s Office at:

Office of Minnesota Attorney General Lori Swanson
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
(651) 296-3353
1-800-657-3787
TTY: (651) 297-7206
TTY: 1-800-366-4812

 

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