If you need a friend, get a dog. While a dog’s friendship is generally tax-free, a nonprofit organization recently asked the IRS if providing pet visitation as therapy to hospitalized individuals was outside the charity’s exempt purpose, and therefore taxable.
The charity in Letter Ruling 201719018 was organized to conduct oncology research and education, emphasizing the development, diagnosis, treatment, and prevention of malignant tumors in humans and animals, and to advance medical research and education emphasizing recognition, prevention, and treatment of diseases.
The charity wanted to initiate a pet therapy program that would provide playful interaction between therapy dogs and hospital inpatients, particularly children, and elderly nursing home residents. The charity believed that children and the elderly would derive a positive and therapeutic psychological and emotional benefit from interaction with therapy dogs, which would lift the spirits of the patients and improve their ability to cope with anxiety.
The charity intended to use registered health-certified therapy dogs that were trained and tested to act as therapy dogs around children and the elderly. Initially, the therapy dogs would be accompanied by an experienced handler qualified to conduct pet therapy sessions. Therapy sessions would be conducted at hospitals and nursing homes at no fee to the participant, the hospital, or the nursing home.
The charity would solicit volunteer handlers to take their dogs to hospitals and nursing homes. Volunteer handlers would have to pass a criminal background check, be adequately insured to cover the risks inherent with pets, and be trained and certified to conduct pet therapy sessions. The charity would promote the program to hospital and nursing home administrators, and would enter into an agreement with the facilities to provide pet therapy to patients or residents on a regular weekly schedule.
From internal revenue code section 501(a): Provides generally that an organization described in section 501(c) is exempt from federal income taxes.
From internal revenue code section 501(c)(3): Describes entities that are organized and operated exclusively for charitable, educational, scientific, and certain other purposes.
From internal revenue regulation 1.501(c)(3)-1(c)(1): Provides that an organization will be regarded as “operated exclusively” for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose.
From internal revenue regulation 1.501(c)(3)-1(d)(1)(i): Includes “charitable” among the purposes for which an organization described in section 501(c)(3) may be exclusively organized and operated.
From internal revenue regulation 1.501(c)(3)-1(d)(2): Provides that the term “charitable” is used in section 501(c)(3) in its generally accepted legal sense, and includes relief of the poor and distressed.
From Revenue Ruling 68-73: Considers whether an organization created to minister to the non-medical needs of patients of a proprietary hospital by reading to them, writing letters for them, and providing other similar personal services in an effort to improve their mental well-being and physical comfort qualifies for exemption under section 501(c)(3). The organization is not related to or controlled by the proprietary hospital. The services are not of a type that is ordinarily provided by a hospital, and members of the organization are not permitted to engage in any activity performed by the hospital staff or employees in the ordinary course of hospital operations. Membership in the organization is open to anyone in the community. In concluding that the organization is exempt from federal income tax under section 501(c)(3), the IRS said that by ministering to the needs of hospital patients by performing personal services in an effort to improve the mental well-being and physical comfort of those patients, the organization is performing charitable acts. The fact that these acts are performed in a proprietary hospital is not material because the primary beneficiaries are the patients, and any benefits to the hospital are merely incidental.
From Revenue Ruling 72-124: Considers whether an organization formed for the purpose of establishing and operating a home for the elderly is organized and operated exclusively for charitable purposes. In concluding that the organization is exempt from federal income tax under section 501(c)(3), the IRS recognized that the elderly, as a class, are highly susceptible to unique forms of distress due to their special needs in advanced age, and said that satisfaction of these special needs, which contributes to the prevention and elimination of the causes of these unique forms of distress, may, in the proper context, constitute charitable purposes or functions.
From Revenue Ruling 79-17: Considers whether a nonprofit hospice, operated on both an inpatient and outpatient basis to alleviate the physical and mental distress of the terminally ill, is operated exclusively for charitable purposes and qualifies for exemption under section 501(c)(3). The organization assists persons of all ages who have been advised by a physician that they are terminally ill to cope with the distress arising from their conditions. It utilizes and coordinates the professional skills of physicians, nurses, therapists, social workers, the clergy, counselors, and lawyers in a planned effort to alleviate the physical and mental distress of dying persons. It does not seek cures through extensive medical treatments that may not significantly alter terminal illnesses, but rather focuses on lessening the distress, pain, and physical difficulties experienced by dying persons. In concluding that the organization qualifies for exemption under section 501(c)(3), the IRS said that by alleviating the mental and physical distress of terminally ill persons, the organization relieves the distressed within the meaning of section 1.501(c)(3)-1(d)(2) of the regulations.
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The therapy dog program furthers charitable purposes within the meaning of section 501(c)(3).
Services provided to hospital patients and other persons in mental or physical distress that are directed to lessening such distress and to improving mental well-being and physical comfort can constitute activities that further charitable purposes under section 501(c)(3). See Revenue Ruling 68-73 and Revenue Ruling 79-17.
Furthermore, activities that are specifically designed to meet the special needs of the elderly may constitute a charitable purpose by mitigating or eliminating a unique cause of distress to which the elderly, as a class, are highly susceptible. See Revenue Ruling 72-124.
A hospital patient, particularly if he or she is a child, may suffer mental and physical distress, not only due to his or her illness or incapacity, but also due to being in an unfamiliar and stressful environment. An elderly nursing home resident may suffer from social isolation, loneliness, and depression, forms of distress to which the elderly, as a class, are highly susceptible.
The program will offer hospital patients, particularly children, and elderly nursing home residents the opportunity to participate in pet therapy sessions during which the participant will play with a trained, health-certified, and registered therapy dog, and interact with the dog’s handler, who has been trained and who is qualified to conduct pet therapy sessions. These sessions will be conducted with the goal of lessening distress, improving mental well-being, and encouraging socialization.
Consequently, the program, as described above, furthers charitable purposes.