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October 2017    Download the Entire Issue (PDF) Available to the Public Vol. 32, No. 10   RSS Feed for Undercurrent Issues
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A Tax-Deductible Dive Trip

but too good to be true

from the October, 2017 issue of Undercurrent   Subscribe Now

When the travel agency Island Dreams announced a Cuba dive trip in September 2016 aboard the Jardines Aggressor I, Jeanne Reeder, a diver based in Liberty, MO, quickly signed up. After spending time in Havana, the 20-person group would spend a week diving in the Jardines de la Reina, notable for its Goliath groupers, sharks and saltwater crocodiles. Even better, divers were told they could get a tax deduction of $3,500 on their trip expenses. That's because the trip was organized by Oceans for Youth Foundation, a USA-based not-for-profit that, per its website, "encourages underwater education for everyone from youth to adults."

A trip that combines great diving with a good cause -- sounds perfect, right? Maybe not if the cause is run by the same people who run the liveaboard and who, even after incorporating the nonprofit 18 years ago, apparently haven't met all the IRS standards for being a legitimate charitable organization.

In her trip report, Reeder detailed how she enjoyed the trip, and gave top marks to the Jardines Aggressor staff (except that they dumped raw sewage into the ocean). But she could never shake the feeling that the trip wasn't meeting the standards of being an educational dive trip.

"I didn't feel like I was doing charitable work," Reeder told us. "There were two great REEF (Reef Environmental Education Foundation) fish counters, and they worked their tails off. But the rest of us, we didn't do anything. We had a wonderful lecture one morning, but that was the only education we got. This was basically a pleasure trip."

Nevertheless, after Reeder made the final payment on her trip, she downloaded the tax letter that offered "documentation of your charitable work on behalf of Oceans for Youth Foundation and our Cuba Marine Conservation Program." The allowable deductions were $500 for food and lodging, $2,500 for marine conservation and $500 for airfare, for a total of $3,500. That's 87 percent of the $4,000 liveaboard fare. "The implication was very clear from Oceans for Youth that it had 501c3 (nonprofit IRS) status," says Downey.

While doing her taxes in early 2017, and trying to figure out where on the tax return to deduct this amount, Downey called Max Langley, an accountant in Houston who was also aboard the Cuba trip with her. He told her that Oceans for Youth, which has the Aggressor Fleet's CEO, president and vice-president of operations as three of its five board directors, isn't officially eligible to receive charitable donations.

Before he files for a charitable donation, Langley always goes online to check the charity. Two criteria are required for a contribution to be deductible on IRS Form 1040 -- it must be a 501c3 exempt organization, and it must be listed in IRS Publication 78, "Organizations Eligible to Receive Tax-Deductible Charitable Contributions." On the Web page for Publication 78, Langley entered "Oceans for Youth" into the search box. No listing found. Then he entered the organization's tax ID number (#43-1851505). Still no listing. Meaning that while Oceans for Youth may be a 501c3, it is not approved to receive tax-deductible contributions.

Langley started emailing Oceans for Youth last fall, and got an email from Anne Hasson, Aggressor's vice-president of marketing and wife of Aggressor president (and a Oceans for Youth board director) Wayne Hasson. "Please don't give up, we are working on getting this listed on the IRS site and don't anticipate it should be much longer," she wrote. "Just as soon as we receive verification, I will let you know."

She never got back to him with an update. Langley says he sent at least 20 emails to Hasson, requesting an update, over six months. One reply was a copy of Oceans for Youth's initial registration letter as a 501c3 from the IRS. Another email stated, "We are working on it and will let you know." The third and final email was, "We'll provide you an answer next week." That was November 1, and still no answer between then and Langley's last email sent in April. "So I have effectively been ignored," says Langley. "This is frustrating, and compounded by the fact I have been a passenger on 10 to 15 Aggressor boats over the past 20-plus years, and a number of the times I booked full or half-full boats."

It was Reeder who got the call -- unprompted. In late March, Sabrina at the Aggressor Fleet says she was requested by her bosses to call Reeder and say they are 'working on it.' "On what?" Reeder asked. "Getting a license," says Sabrina. "The attorney is working on it."

Reeder persisted by asking," How long have you been working on it? Are you notifying your clients?" Sabrina's answer to both was, "I don't know, but I will try to find someone who knows." Reeder never got a follow-up call.

These two aren't the only ones asking the Aggressor for clarification and confirmation. Over the summer, Langley talked with Ken Knezick, owner of Island Dreams, who said his group on the Aggressor's June 2017 trip to Cuba also got the letter of deduction, and the Aggressor Fleet was also giving the runaround to one client who inquired about their charitable status.

Neither Langley nor Reeder deducted the $3,500. "Odds are the IRS wouldn't kick it off your tax return, but it doesn't make sense," says Langley. "How can they be a 501c3 but not eligible for deductions? In one email to them, I even wrote, 'I'm a CPA, I can help you with that.'"

We're stumped, too, and the Aggressor Fleet isn't getting back to us with clarification either. According to the IRS, organizations not listed in Publication 78 may be facing suspension or revoking of their exemption for not filing their annual return (Form 990), for three consecutive years. However, when we checked GuideStar, a major database for information on charities, Oceans for Youth's Form 990s are listed every year up to 2015 (its annual income that year was $66,860 and its expenses were $63,822). Maybe the Aggressor Fleet doesn't know either, but leaving divers with questions about tax deductions in the dark doesn't make their charitable organization look too legit.

"I would have gone on the trip anyway, but it miffed me," says Reeder. "It's extremely unprofessional to put out the letter knowing it would not be legally tax-deductible. And it's irresponsible not to respond with something more than 'We are working on it.'"

There are plenty of other organizations offering dive trips as legitimate volunteer vacations, including:

The Sea Turtle Restoration Network regularly offers trips aboard the Undersea Hunter fleet to tag sharks and sea turtles at Cocos Island (www.seaturtles.org).

The Reef Environmental Education Foundation (REEF) regularly hosts weeklong 'field survey' trips that teach divers how to identify fish and collect data for REEF scientists. Trips in 2018 are all over the globe, from British Columbia to Brazil (www.reef.org/trips).

EarthWatch sponsors expeditions for people with no special skills to become 'research assistants' and work alongside scientific pros. They run many expeditions, from swimming with sharks in Belize to monitoring coral health in the Caymans and the Great Barrier Reef (www.earthwatch.org/expedition).

To take the write-off for any travel-related expenses you incur to do charitable work, you need to follow all the relevant IRS rules. A few guidelines to keep in mind:

Volunteer at qualified charities. Before you donate any money or time to a charity, verify its status by using the IRS's Select Check tool (https://goo.gl/dbxWt4).

Document only the necessary expenses. The IRS says any out-of-pocket expenses you want to deduct, like travel, must be "necessary while you are away from home." They also need to be unreimbursed, directly connected with the services you provided, and an expense you had only because of your volunteer work.

Do "real and substantial" work for the whole trip. You won't get the deduction if you only have "nominal" obligations or lack work for large parts of the trip.

Don't tack on an extra vacation. Be aware that your travel expenses won't qualify as deductible if a significant part of your trip involves recreation or vacation. But as long as your trip is focused on the charitable volunteer work, you can deduct most travel expenses -- airfare; car expenses, lodging, meals; taxis and other transportation to/from the airport or your hotel.

- Vanessa Richardson

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