Kanye West’s Foundation Flop

March 5, 2012 — Leave a comment

Starting a 501(c)(3) charitable organization is not only admirable but savvy for tax purposes. However, to maintain a charitable organization, one must donate money to said organization. Kanye West created the “Kanye West Foundation” in 2007 to help the dropout rates in school. The only problem was the charity did not do charity.

The IRS has reviewed the 2009 and 2010 tax returns for the organization and many questions have been raised about the legitimacy of this venture. Only $581 was donated through the foundation in 2009. In 2010, not one cent was spent on program activities. Despite this data, the foundation appeared to have substantial money to spend on other expenses. According to the 2010 tax return, expenditures reached $572,383. $339,829 was spent on salaries, wages, and benefits, $112,250 was towards “professional fees,” $59,620 on other expenses, and $48,385 on travel, conferences, and meetings.

According to the non-profit watchdog group, Charity Navigator, the allotted amount for overhead should be 15% of the charity’s cash flow, while 65% should be allocated towards program activities. The Kanye West Foundation was nowhere close to reaching these figures. According to its cash flow statements, the rapper donated $5,000 in 2009 to the foundation and $88,501 in 2010. Kanye’s company, West Brands, also donated $35,000 to the foundation and only four other individuals contributed to the foundation.

The Kanye West Foundation did not adhere to charitable standards and practices, thus there is no surprise it failed. In the future, if you wish to give money to lesser-known charities, do not be afraid to demand how they spend their money. You should want to know where your money is going and how it is being utilized by the organization.

Jeffrey D. Katz Esq. is the founding partner in the law firm JDKatz, P.C. Formerly with KPMG’s Mid Atlantic tax practice, Mr. Katz’s practice focuses on tax, estate planning and real estate matters. Mr. Katz is admitted to practice in the State of Maryland, US Tax Court, US District Courts for Maryland and the District of Columbia, and before the United States Fourth Circuit. Mr. Katz routinely lectures on tax and corporate law issues in Washington, DC and suburban Maryland. Mr. Katz lives in Montgomery County, Maryland. He may be reached at 301-913-2948.

No Comments

Be the first to start the conversation!

Add your $0.02

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s