Section 170 of the Internal Revenue Code allows income tax deductions for charitable contributions. The typical donations are cash or property. If property is donated, a deduction is clearly allowed provided the fair market value is determined.
However, not all contributions are deductible. What about the contribution of services? How about the contribution of air time by a radio station or space in a newspaper? Or with the internet becoming the preferred choice of communication, how about free advertising by an internet service provider to a charity?
The Internal Revenue Service has made a distinction between contributions of property and contributions of services. Though the difference is enigmatic in certain instances, generally, a contribution characterized as a service, unlike those which are determined to be a gift of property, will not be tax deductible.
The IRS has held that broadcast time or publication space afforded to a charitable entity is deemed a service and is therefore not tax deductible. For example, a radio station owner was not allowed a deduction for the fair market value of the air time which he provided to religious and other public affairs groups. Rev. Rul. 67-236, 1967-2 CB 103. Similarly, a newspaper which published advertisements for charitable organizations was found to be providing a service which was not a deductible contribution. Rev. Rul. 57-462, 1957-2 CB 157.
Although the IRS’ view pertaining to the internet is not as yet defined, when analyzing the contribution of web space through the above mentioned framework, it seems more analogous to the donation of broadcast time or publication space. Therefore, providing a free medium for charities to disseminate information (whether it is a newspaper, the radio, or the internet) is the contribution of a service which is not deductible under §170.