TAX LAW AS APPLICABLE TO THE SCA
by Lady Prudence the Curious (created March 10, 2017)
DISCLAIMER: I am not a CPA, an Enrolled Agent, or a Tax Lawyer. I have been a tax preparer for over a decade. I am writing this in 2017 for the 2016 tax year and tax law has over 2,000 changes every year so always consult a tax expert for the most recent laws. Most states have their own set of tax code and I have not studied any in particular. This information is provided for free and is not a substitute for Congressional Tax Law or Decisions of the US Tax Courts.
SCA AS A CHARITY ORGANIZATION
The SCA enjoys a 501(c)(3) tax exempt status. To maintain this status the SCA regularly collects information regarding its non-profit activities, specifically in relation to education of the public, through the offices of A&S and Chatelaine. Teaching and demonstrations allow the SCA activities to count as charity dedications instead of being treated as a community club like a bowling league, car show, or fight club. Seneschal and Exchequer duties include providing the financial information to support the organization’s efforts to meet the IRS record-keeping requirements.
SCHEDULE A FOR CHARITY DEDUCTIONS
To claim charity deductions, a taxpayer must file a Schedule A. In general a taxpayer can take the Standard Deduction (this year (2016 tax year) it’s $6,300 for a single person and $12,600 for a married couple (double the single) – note: the amount is adjusted by Congress EVERY year) or an Itemized Deduction. Because Standard Deduction is more than the average taxpayer can exceed unless s/he has a mortgage, most people do not benefit for claiming charity deductions.
A Schedule A includes the following sections:
- Medical and Dental Expenses – For unreimbursed expenses over 10% of AGI. Taxpayers need to keep track of all expenses such as insurance paid with POST-TAX money (most employers take out medical insurance PRE-TAX and so the employee already got the tax benefit), prescription drug co-pays; lab work; doctor & dentist co-pays; hospital visits; medical equipment like eyeglasses, hearing aids and crutches; and mileage traveled to pick up prescription drugs and go to doctor visits. A medical diary/notebook is helpful. For most people 10% of their income is only hit if they have major surgery or a disabled child.
- Taxes You Paid – State income taxes; real estate taxes; personal property tax on your car, boat, etc.; and foreign and other special taxes.
- Interest You Paid – Home mortgage interest on your primary and second home (interest paid on an RV or boat may count if the “second home” includes sleeping, cooking and toilet facilities, please consult a tax professional) and investment interest (again tax professional on this one – the law here gets very esoteric). NOTES: (a) Credit card interest and interest on a car loan are NOT claimable. (b) You must both be LIABLE for the loan and PAY the loan. You cannot pay the mortgage for your mom and claim the interest – in fact no one can claim it, because you are not LIABLE and she did not PAY.
- Gifts to Charity – THIS IS THE SECTION THAT APPLIES TO THE SCA AND I WILL BREAK IT DOWN MORE LATER IN THIS ARTICLE. (a) Gift by check or cash. (b) Other than by cash or check.
- Casualty or theft loss(es) – Fire, flood, or theft affecting your house or car. Requires a special form, you don’t get to claim what is reimbursed by your insurance company, and the first $500 is not tax deductible. If a taxpayer actually has enough to claim this one, they had a very bad year and need the tax deduction to help recover.
- Job Expenses and Other Misc – These are limited to amounts over 2% of the AGI. Everyone is expected to spend a little of their own income to work, but some salespeople, traveling nurses, and licensed beauty providers can make the cut. Also in this section is investment related expenses such as tax preparation and IRA maintenance fees.
- Other Miscellaneous – Which do not fall under the 2% rule. Most common is Gambling Expenses and Hobby Expenses which I will touch on later.
The most commonly-used Schedule A sections used are Taxes You Paid, Interest You Paid, and Gifts to Charity.
PLEASURE VS. NON-PROFIT WORK
Some charity work and expenses are very straightforward for claiming as a Gift to Charity. Tithing to a church, drop-offs at Goodwill, and building a home for Habitat for Humanity are all clearly efforts for which the major “payoff” is the good feeling after you are done.
Pleasure activities are also usually straightforward such as bowling, attending a party, or a skiing weekend.
SCA activities fall somewhere in between, along with some Scouting activities and fundraising galas. Lots of Tax Court decisions and expansions on tax law by Congress have been created to better define the breaks between pleasure and charity work.
First part is a group must benefit, not an individual. For example, donating to a hospital is tax deductible but helping a friend pay his medical bills is not. Even putting money in a jar on a counter which says “help Bobbie with his Chemo” is not tax deductible, but putting change into the “Children’s Miracle Network” would be a donation to charity. In SCA terms, a donation to help Mistress Elizabeth replace her garb after her house burned down would not count, but donating to the kingdom scribal guild through the exchequer office would.
Second is the taxpayer cannot get any material and/or tangible benefit. The most common examples of tangible benefit for a cash donation are PBS or gala fundraising. PBS often offers incentives to help fundraiser; if you donate $100 and get a $20 book, you only get to claim $80 as your tax donation. For a gala, you might pay $100 to attend. For the response, they should say dinner is $30 and thank you for your $70 donation. In SCA terms, the event fee to attend an event is tax deductible but the separate feast fee is not. The event entrance fee is considered fundraising by the IRS, but food is a tangible benefit.
Third, the primary purpose of attending any activity where the mileage and expenses being claimed must be for non-profit benefit. Again with the gala example, the attendees attend for the food and dance while the organizer is there to work. The attendees cannot claim mileage for the attendance while the organizer can. This rule is very similar to the renter’s ruling. If a renter owns a house in a different state, near where their parents live, and go to the rental to upgrade the windows and stay with their parents while the work is being done, then it is tax deductible. But if they go to a family reunion and incidentally look in on their renters and make sure everything is okay, then the travel costs are not deductible. Usually something is happening somewhere in between and defining primary purpose is important.
“Primary Purpose” is defined as the main intent of traveling out of town is for the activity. Pleasure activities may be included, like sightseeing, but if the primary purpose was removed, the trip would not have happened. This is easy to prove for SCA purposes if you never have attended an annual event before you volunteered to do something for the event one year – say, the children’s activities. But for most SCA event attendance, a gray area occurs. For example if you always attended your barony’s business meeting and fighter practice, and you recently became a baronial officer, can you now claim the travel costs? (In the Barony of Sacred Stone, the answer is yes since one of the requirements of holding office in the barony is attending the baronial meetings.) A diary of SCA activities should be kept to prove primary purpose.
Non-profit examples of meeting primary purpose is attending a scouting function as a parent. Going to a meeting does not count. Driving the troop to a state fair and dropping them off before breaking away to enjoy the fair yourself, leaving the kids in the hands of the troop leader would mean you can claim the mileage but not the entrance fee. If you only drove your child and his best friend, leaving a seat empty in your car, because you hate sticky fingers, then you don’t get to claim the mileage because providing for your child is something you do – you did not provide to the troop. (Remember rule one where it must be for the group, not an individual? Yeah.) If you drove the troop to a camping event, set up the tents, supervised the camp and maintained the fire while the troop hiked, provided first aid for the blistered feet, packed camp, and drove home, then you can claim all expenses.
DONATIONS UNDER AND OVER $250
For gifts under $250, a record of the date of the donation, the amount of the donation, and the name of the organization is required.
For a contribution of $250 or more, additional documentation will be needed over and above a canceled check or credit card receipt. The organization should provide a written acknowledgement stating how much was received and no goods or services were provided in exchange for the gift.
Volunteer work expenses are considered part of the Cash/Check donations.
DONATIONS OF NON-CASH ITEMS
Items donated must be of good condition or better. The property is valued at what the group can sell it for (fair market value), not what the taxpayer bought it for. For example, dropping off a $250 Gucci suit coat at Goodwill. They sell suit coats for $10, so the donation is for $10.
If a taxpayer has more than $500 of property donation for the entire year from all sources, s/he needs to fill out an additional form where the date of the donation, the group donated to, their address, the value of the donation, and the original price of the donation is listed.
Note that mileage and participation in non-profit events is considered CASH/CHECK donations so it won’t count toward that $500 property donation limit before the additional forms kick in. So for the most part, non-cash items lines do not apply to the SCA.
DONATIONS TO THE SCA: MEMBERSHIP
SCA membership does not come with any tangible benefits. The magazines are distributed via email now. If you pay, separate from your membership, for a paper copy, this addition to your membership is not tax deductible because you are getting a tangible benefit.
DONATIONS TO THE SCA: CASH OR CHECK
For donations over $250, the group’s exchequer receiving the donation should provide a letter saying no goods or services were provided.
DONATIONS TO THE SCA: EVENT FEES
The SCA has regular fundraisers; we call them events. The event fee would be considered a donation, as mentioned previously, the feast fee would not.
DONATIONS TO THE SCA: NON-CASH ITEMS
Donating your old pavilion to the local group to help with demos does not mean you get to claim the $2500 it originally cost. You will need to document of what a used pavilion in its present condition would be sold for, using eBay, pavilion sites, etc. . That is the donation amount. Once you have figured out the amount, you will need to get with the group’s exchequer and write the letter.
The problem is most of the donated items are for things where there is no “fair market value”. Artwork created, like scrolls and embroidery, gets tricky. A common donation for raffles is swords. Swords, fortunately, have a modern market and proving fair-market-value is easy. Whereas art like scrolls is in the eye of the beholder and really don’t have an easily provable value. I lean towards no reimbursement for labor. If a nurse volunteers her time at a blood bank, she does not get to claim her time. She does get to claim any needles used and mileage. Interpreting from this, I assume (again, talk with your local tax professional) a scribal artist can claim for materials used but not what the scroll would sell for on the open market.
The most common donation in the SCA outside of scrolls to kingdom is garb to Gold Key. In many cases the garb is donated in good condition, but there is no fair-market value easily attributed to it. Used costume values should be applied, which run about 10% of the original material costs. I know, it sucks.
DONATIONS TO THE SCA: RAFFLES TICKETS
Raffles are not charitable donations. Remember me mentioning I would touch on Gambling Expenses later? Yeah, here we go. Raffles are lotteries and are considered a form of gambling. Any winnings are treated as gambling winnings and should be reported under “other income”. For items won more than $600 the sponsoring group’s exchequer should provide a 1099 Misc. and file the related paperwork with the IRS. Which is why most SCA groups will not have package (raffle) prizes more than $500 to be on the safe side.
Most states in the Kingdom of Atlantia have very firm gambling laws and, in general, restrict a group to only one raffle a year. That isn’t group as in Canton, it is group as in all SCA activities in the state. The Kingdom of Atlantia actively discourages any raffles as a result because it cannot let only one local group have a raffle and deny everyone else. If you are an autocrat, consult your state and Kingdom law before offering a raffle and touch base with your local exchequer.
But, if your local law is less strict than what we have in Atlantia and your kingdom allows raffles, for tax purposes you must enter the winnings under “other income” with the notation “gambling winnings”. If you also itemize with a Schedule A, you can claim gambling losses on the Schedule A under the Misc. section previously mentioned. But you can only claim gambling losses up to gambling winnings. The plus side is the gambling losses can be in different areas from the gambling winnings. For example, you won a $1000 hand-made sword in the SCA, $1000 would go under other income and you could claim expenses of the $10 raffle ticket as well as $50 on lottery tickets and $100 spent on a Bingo night and $200 on a casino trip (the mileage and food bought at the casino are not deductible, only the gambling expenses are).
DONATIONS TO THE SCA: GARB AND EQUIPMENT
You may have heard Civil War reenactors can claim their garb and accessories like their guns and camping equipment as tax deductions even though these are privately owned by the individual and not the organization. My understanding is you cannot do this for the SCA.
This is a personal interpretation and I highly recommend you talk to a tax professional directly with any questions and/or do your own tax code research. The reason I think the SCA stuff is not deductible is a fundamental difference in how the SCA operates and how Civil War organizations operate. Nearly all of the Civil War activities where the costumes (and they call them costumes) and equipment comes out of storage is for demonstrations open to the public for education purposes. For the SCA, the majority of events are fundraisers requiring entrance fees and all participants to wear garb.
Much of our equipment is used around our houses or can be used for purposes outside the SCA. Mugs and chairs are tucked into our house decor. The tents are used on mundane camping trips. And all of it is used exclusively by individuals. Our garbed activities are more like costume parties than an educational reenactment.
If you want to compare garb to cos-play at conventions, then the cos-players who have made a business get to claim these as a business expense but not as a charity expenses. I have done a little research on science fiction and writing conventions and nearly all of these fall under non-profits BUT not versions of non-profits which can claim tax exemptions. (Bet you didn’t know there were non-profits who are not tax exempt.) Conventions are more like fraternal organizations and are limited to benefits for internal memberships. (Yes, I know it looks like an event fee for attending but if you notice all of them word it as a “membership dues” for a reason.) Attending ConCarolinas or DragonCon, for two examples, are not tax deductible and neither the membership dues or the costumes worn there are deductible unless you are a business owner. For people who work the cons as officers, everything above about donations to charity in relations to working the event does not apply because the event is not tax-exempt.
You can donate garb and equipment to your local group and that would be tax deductible (see the Non-Cash donation section for some of the issues you might run into with that).
DONATIONS TO THE SCA: TRAVEL
Everything up to here is fairly straight forward … yes, really it has been. But mileage and lodging & food for overnight activities gets into a gray area.
The IRS states “You can deduct your travel expenses if your work is real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.”
As an officer, attending functions required by organizational rules, can easily be proven as part duties/non-profit work instead of pleasure. A seneschal must attend business meetings, Unevent, and any local events held by their group where they must be available the entire time. An A&S minister can argue attending A&S meetings is part of their duties. A marshal at-large traveling to an event to marshal all day and return home before feast again has a solid case.
But what about a seneschal attending an event in a neighboring group? Well, that is not part of the seneschal’s duties so now “primary purpose” gets a little fuzzy.
And teaching at events, while central to the SCAs non-profit status, can be hard to divide between the teaching one class and attending five other classes. Arguing the primary purpose was to teach the one class and not for your own personal pleasure of attending the five other classes would be a hard sell since the duties were not “for significant parts of your trip”. On the other hand, the materials you bought to teach the class could be claimed unless you charge the students a class fee to recover costs.
Food costs can only be claimed in charitable activities if the stay is overnight and the overnight is required to perform the primary purpose. Food costs are actual expenses tracked, so you will need the receipts. Food costs can be groceries or prepared foods bought from vendors. While for business and employee expenses, standard food rates can apply, charity activity is actual expenses only. Lodging costs work similarly, only actual expenses apply.
RECORD KEEPING: MILEAGE
Mileage recordkeeping requires a few essential pieces of information. The various tax reasons you may want to track mileage include medical, employment, job hunting, charity, self-employment, and rentals. Many people don’t realize you can claim mileage for medical purposes, such as visiting the doctor and picking up prescriptions. Employment mileage does not include commuting, but if your employer sends you to a temporary assignment like covering a different store for a week while the manager is on vacation, you can claim that. Discussing what you can and can’t claim for mileage will take up another whole page so I will limit myself to tracking SCA mileage for charity purposes.
The challenge with mileage is finding a method which works for you in that you will remember to do it each and every time. The IRS recommends a log book where you write the start and end mileage every time you take a trip. This doesn’t really work well for me. Fortunately the IRS does not require any particular format for keeping track of mileage, only that it is consistent and done in a timely manner. Timely meaning the records are kept within a reasonable time where you can show the ability to create the materials accurately. Which means if keeping the “daily” log book by entering the activity every month would be acceptable if that works for you. For the recordkeeping certain information is needed.
First, I recommend knowing how many miles you put on your car per year. One of the easiest ways to do this is always have an oil change in December or January. While actual full-year mileage is not required for charity-only mileage tracking, once you get a good system going you may want to track mileage for other tax purposes as well like self-employment or job hunting. The method I use is track my gas purchases and do the calculations from the first purchase of the year.
Second, figure out how you can keep the log. The information you will need is the date, total miles, destination, and purpose of the trip. Total miles usually means you will need the start and stop of your odometer, and this is the most accurate method. The destination should include city and state, but for SCA stuff I often write the canton. Purpose should include any particular duties you had and people you saw or the event name.
At the end of the year, the mileage should be totaled and the log saved with your tax records.
I tried the full log, writing in every trip, and found that doesn’t work for me. My method is to print out all regular trips in MapQuest and put these in my log book which I keep in the car. At the end of every month I write in any appropriate mileage to A&S and Business meetings where I had significant duties based on the MapQuest record for the location. I don’t get to record the mileage for every A&S meeting since I attend most of them for pleasure, but I do teach some and those I claim. For events I again print off the MapQuest directions and when I go to the event I write the day and starting odometer reading on the printout. If I forget to write the end of trip odometer on the form, which is my normal failing because of exhaustion, I still got a good mileage record to work from.
In 2016, I put on 4,322 miles on my vehicle for SCA activity. A significant portion of those miles were attending baronial business meetings as the Canton Seneschal and/or Baronial Officer. The rest were events where I had significant duties.
RECORDKEEPING: CASH EXPENSES
I haven’t developed a method I consistently use for recordkeeping of cash expenses of event fees, art purchases, and food for overnight events. As previously mentioned, under DONATIONS OVER AND UNDER $250 the IRS requires the following records:
1) For gifts under $250, a record of the date of the donation, the amount of the donation, and the name of the organization is required.
2) For a contribution of $250 or more, additional includes the organization providing a written acknowledgement stating how much was received and no goods or services were provided in exchange for the gift.
In general event fees, art material purchases, and meals rarely exceed $250 so you only need to keep record of the date, amount and name of organization. Since nearly all of the SCA falls under SCA Inc., (with exceptions like Maryland SCA) the name of the organization can be just SCA Inc. or can be more specific as you want. Putting a log book in your car for attending events, purchasing materials, and buying meal as well as mileage tracking could keep everything right where you track it.
You should find a method which works for you consistently. As mentioned at the start of this section, I am failing in this.
I like to reserve for events in advance with checks and use my checkbook to keep track of event “donations”. I mark in my checkbook which were site fees and how much the feast portion was. Combined with my bank statements showing the checks were cashed and the online kingdom calendar going back several years, I have adequate records for the IRS.
Purchases for teaching classes gets a bit more problematic. I try to do them all on credit card and save the receipts. In general, sometime during the year the receipt box gets away from me and I rarely end up claiming these expenses.
For food at overnight events where I do significant work, I never claim costs. The recordkeeping is too much of a bother for me. For example, at Pennsic and War of the Wings, I pay for all my meals in cash and the vendors rarely give receipts. I much rather enjoy my meal and the event then chase pieces of paper.
HOBBY INCOME
Someone asked me about claiming the SCA as Hobby Expenses. Hobby Income and Expenses work just like Gambling Income and Expenses previously mentioned under raffles. For tax purposes you must enter all hobby income under “other income” with the notation “Hobby Income”. If you also itemize with a Schedule A, you can claim hobby losses on the Schedule A under the Misc. section previously mentioned limited to the Hobby Income.
An example is my calligraphy. Upon investigation of whether I could do it as a business, I knew I wouldn’t meet the profit three-out-of-five years requirement so I continue it as a hobby. On occasion a friend asks me to make a wedding scroll or a bible verse scroll for them to give at Christmas and they pay me for it. Since the IRS requires all income to be reported, including hobby income, I report the income on the 1040 and list matching expenses on the Schedule A. Since I am not trying to make a profit at the scroll work, finding matching expenses is a piece of cake. I usually spend triple of any hobby income I take in.
SCA activity, in general, best falls under the charity rules.
EXAMPLE
Throughout I tried to give you some examples of what and how you can claim things. Here are a few more examples from my life.
I attend Twelfth Night, but because of tax season I am never sure when I can arrive or leave so I never volunteer for anything there. Often I do “nominal” duties, working the kitchen, serving feasts, running errands, but I do not consider these significant nor are they my “primary purpose” in attendance. Twelfth Night was my first event and my SCA birthday. Even with the mileage I rack up attending this function, I cannot claim it for charity purposes.
At the other end of the spectrum is Unevent for which mileage is a must. Since the event is business only, proving it meets “significant” duties is easy.
Likewise, for me, attending Pennsic can be claimed because of my duties as Executive Troll absorbing over 8 hours most days I attend. An average person attending Pennsic can have significant commitments in attending, but still fall short of meeting the IRS requirements. Someone teaching two classes, while a strong duty, obviously doesn’t have teaching as a primary purpose. “Camp mom”, while needing to be on-site the first week and have significant duties the first two days, the duties are not “real and substantial throughout the trip” unless s/he leaves shortly after setup is completed. Being part of royal entourage as a guard or retainer doesn’t count either, even if you work the full event because that is part of the game/playtime. The royals get to claim attendance since they are Officers and are on-duty for the entire event.
IN CONCLUSION
I would recommend reading IRS publication 526 Charity Contributions. An individual is expected to know the law of the land, so technically you should read the tax code not the department’s interpretation of the tax code but Pub 526 is a great place to start to find out the actual documentation requirements and form submissions.
If you love this sort of thing, the IRS has a 61-page white paper related to charity fundraisers and various Tax Court decisions expanding on what were considered legal fundraisers for charity purposes and what ended up being defined as “for-profit” – see for details: https://www.irs.gov/pub/irs-tege/eotopicl82.pdf. I found the paper helped clear up some of the fuzziness of words like “primary”, “substantial”, and “nominal”.
I love the SCA and have enjoyed doing substantial volunteer work for the organization. While rarely I have been in the position to file a Schedule A to benefit from the charity work, I do still keep track of everything because some years it has saved me hundreds of dollars (which I plow right back into the Society, usually in my embroidery teaching and projects). I hope this helps other gentles put money back into the Dream as well.
