taxes, charitable donations, and folding@home

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taxes, charitable donations, and folding@home

Postposted on Sat Nov 25, 2006 1:57 pm

I was telling my grandfather about Folding@Home recently. (He's an interesting guy... getting older, but still totally into electronics and computers.) We were talking about minimization of power consumption, and how it's important to balance functionality against that. As we were getting into the raw numbers (ie - 100W machine using 0.1 kWh, equating to ~$9/month for that machine), he brought up a good point: tax deductability for the power consumption. it's important to note here that we were talking about using the electricity costs for deductability, not the cost of the hardware itself.

here's the research i've done.

i've checked the F@H main pages - their donation page lists them as a non-profit, with a federal tax ID. that's a good thing.

i checked the F@H forums - this was the best thread on the topic, but fatchick never came back about what her tax rep told her. some other poster generated a single entry, but under a different (yet similar) name; that person, however, does not mention consulting with a CPA. the thread was eventually locked due to everyone saying "i am not a CPA, but..." :roll: there was also this thread about how, if you're folding at work (and in the UK) you probably can't deduct anything either.

i checked our forums - we briefly grazed the idea, but never made much progress in that thread (or others).

google wasn't very useful.

as far as i can tell, there's no information readily & publicly available on whether or not the cost of the power draw associated with the F@H project is tax deductible. there's a lot of educated guessing going on, but there's no one in particular that's stepped forward with strong evidence supporting or nullfying the question at hand.

it looks like the biggest problems are receipts from stanford for the "donations", and validating the power draw is being used for the folding@home projects. unless any of you guys know anything or can find anything, i'll be going to an H&R Block next week to see if they can put me in the right direction. i'll let you folks know what i find out.
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Postposted on Sat Nov 25, 2006 2:23 pm

I think you've already put your finger on the main problem: proof from Stanford, and about your own actions. Money instantly involves accounting, but running a computer which can have multiple uses is different. And Stanford would be forced to make you fill out a form with your real name, Social Security or tax ID number, and keep that information along with your actual contributions.

All in all, it's likely too much effort for them, and I doubt they'd think it would increase what they're getting by much.

So, this is real charity, and everything you contribute you "lose." :wink:
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Postposted on Sat Nov 25, 2006 2:52 pm

Ragnar Dan wrote:... And Stanford would be forced to make you fill out a form with your real name, Social Security or tax ID number, and keep that information along with your actual contributions. ....


I have never had Goodwill do this, nor have shriners, or have Special olympics done it to me. Most just send a receipt.

Of course what you claim, and what will be allowed are going to be different only if you are audited. It would pay to be on the safe side and play the game by the tax rules as best you can with the help of a paid professional. I wouldn't consider HRblock tax pro's either. Go find a real accountant... one that charges $150/hr or more and has been in business and has some real clients that have been audited and survived, and pay them for 4 or 5 hours of consult.

If you have a place of business, and leach power for folding from the business, you could still write the folding power off in the cost of doing business, and you would only be out the cost of the electricity, not the cost of the electricity and the taxes owed on the money.
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Postposted on Sat Nov 25, 2006 3:26 pm

This topic comes up from time to time on the [H] as well. So far from what I know it is not too feasible to file charitable donation claim, yet.

So for now you have to be content with Folding out of the goodness of your heart, the geek need to have a farm, the challenge/experience of managing multiple machines and networking, points, bragging rights, etc. :wink:
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Postposted on Sat Nov 25, 2006 3:30 pm

Can you do cheritable work for X organization only then to write off that time at what you could have been paid hourly?
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Postposted on Sat Nov 25, 2006 6:32 pm

pete, i'm certain that you can't. however, this isn't an investment of my time, it's an expenditure of my money buying electricity running a project for a non-profit. i think that makes it different enough to be worth asking about.

FF, the only problem I've had with all of the forum discussions I've seen so far is that no one has actually found out if it's possible; it's all just educated guesses. even Vijay from F@H just asked a person, but only about the computing hardware, not the electricity used.

cass, I'll be hitting H&R Block first to see what happens; lowest investment of time & energy. If they can't give me a good answer, I hope that they'll be able to refer me to either an internal or external resource that will be willing to investigate for us.

edit - i found that the local IRS office will answer tax law questions too. I'll start THERE, then work my way backwards into a paid professional's office.
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Postposted on Sat Nov 25, 2006 9:13 pm

cass: The places you mention are giving you a receipt for money. That's all you need. Stanford can't possibly do anything like that.

Thinking about it more, it might end up that the IRS would do like is done for mileage rates for vehicles, since computer power use and output both vary so widely.

I agree with you, though, that probably the only way to get a reliable answer is from an accountant or tax attorney. IRS answers can be... interesting, but considering how much they apparently disagree from one office to another, it's not something I'd want to risk much over.
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Postposted on Sat Nov 25, 2006 9:53 pm

Ragnar Dan wrote:
So, this is real charity, and everything you contribute you "lose." :wink:



As Ranger Dan said this is real charity. You do it out of a sense of helping your fellow man not for a tax deducation.


My opinion is if you are a regular person using home computers I wouldn't even bother with the tax deducation business. Now if you have set up a data center for the sole purpose of running F@H then I think it would be feasible to explore the tax deduction side of the business.
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Postposted on Sat Nov 25, 2006 9:55 pm

dragongoddess wrote:My opinion is if you are a regular person using home computers I wouldn't even bother with the tax deducation business. Now if you have set up a data center for the sole purpose of running F@H then I think it would be feasible to explore the tax deduction side of the business.
eitje plans to set up a garage-ful of machines in racks for Folding, so it is up in the bigger scale category.
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Postposted on Sat Nov 25, 2006 10:10 pm

I suspect that this is the sort of thing that would cause you grief if you ever got audited. IMO it just isn't worth it.

If you have a home business, you can write off part of your electric bill (and other utilities) as a business expense. But IIRC the amount you can legally write off is prorated by the fraction of your house which is used exclusively for business purposes -- i.e. if you have a 2000 square foot house, and you have a 100 square foot area which is used for your business, you can write off only 5% of your utilities). The home business utilities writeoff is also one of the "audit flags" the IRS has traditionally used (i.e. it increases your odds of getting audited).
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Postposted on Sun Nov 26, 2006 3:29 am

You know I've been out of the computer building biz now for a year or so. Todays Tech is what any folder should purchase. I cannot see any value in Celerons,VIA's,Durons and other sub 2ghz chips. Its not worth the power bill. Run fewer but more powerful systems to max your point production.

And don't even think setting a farm up in the garage is going to make it easy to get a tax deducation. I would not want to be you when the IRS comes knocking saying its time for an audit.
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Postposted on Sun Nov 26, 2006 10:07 am

well, the folding farm was the first idea, the tax deduction was the second. :P

both, plainly, require plenty of research before trying them.
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Postposted on Fri Dec 01, 2006 3:23 pm

Tax deductions get brought up on the Folding Forum every March/April.

It isn't so much proving your donation, as putting a valuation on the donation.

And you are not actually donating electricity to anyone, simply using the juice to produce WUs. As such, how do you prove to the IRS that a WU is worth $20 or 2 cents? You can't, so then no way to defend yourself in an audit.

You're better off making a cash donation to the project if you need a tax write off.
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Postposted on Sat Dec 02, 2006 3:39 am

i've seen your posts on the main folding forums. i appreciate your input here, but i still plan on bringing it up with the IRS or/and a tax attourney. unless you work for or are a representative of either of those, your input - as much as mine - is merely speculation.
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Postposted on Mon Dec 04, 2006 2:58 pm

Great. Please report back what you find out so we can compare what the Tax Attorney said compared to us amateurs. ;)
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Postposted on Mon Dec 04, 2006 3:24 pm

Couldn't you just get a separate electric meter put in just for the farm? That way there would be no argument over how much your spending.

Considering the size of the farm you're looking at it might be an idea anyway. It would certainly help you keep track of the cost.
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Postposted on Mon Dec 04, 2006 3:33 pm

I'm a CPA, and my input is also merely speculation. I suspect, however, that documentation and valuation difficulties would preclude you from being able to prove the value/authenticity of any tax deduction you may claim.

cheesyking's idea of a separate electrical meter for the folding farm is on the right track, but there's still the issue of proving that the farm is used only for folding. You may very well be able to do this, but as with most "new" deduction ideas, the IRS is likely to fight you tooth and nail, at least at first. That means time invested on your part - most likely lots of it - and money out of your pocket, if you want to defend your deduction.

Tax issues of this kind are usually addressed when big money is involved - and that means something along the lines of an entire commercial data center set up with folding@home installations. Since a data center is extremely unlikely to be used only for folding, how does one go about demonstrating what portion of the data center's power draw is used for folding? I'm no expert in that area, and perhaps it can be done, but this is the challenge you would face if you wanted to be able to defend such a deduction against the IRS.

EDIT: And let's not forget the fact that, unless you as an individual are filing Schedule C and using your business machine(s) for folding, any charitable deduction you may claim will be on Schedule A. That means that any charitable deduction for folding power draw would only be useful to you if you are itemizing your deductions.
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Postposted on Tue Dec 05, 2006 1:39 am

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nice. ;)
thanks for the input as well. as soon as i have less than 5 fires to put out every day @ the office, i'm going to take some time and run it by the IRS. rather than approach it as "i'm deducting this", i'll be asking "what would i need to be able to deduct this?"

aaany day now....
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