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$6.4M held up – Outpouring of donations

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Tax rules are slowing down the distribution of funds collected for the families of six Worcester, Mass., firefighters who died in a warehouse fire last year, the Associated Press reports.

“The amount of money raised exceeded any expectation that we had,” Francis Cole, a representative of the Telegram & Gazette of Worcester, which set up the fund, told AP. “And it may well exceed the amount the IRS would allow to be distributed directly to the families.”

He said the community, including the newspaper, “wants this money to go to the families.”

After the firefighters died, leaving 17 children fatherless, the public responded: More than $8.5 million was collected by different relief funds.  Some of that money has already been given to the families.

The largest fund, however, worth more than $6.4 million, was set up as a nonprofit corporation.

The fund’s nonprofit status allows donors to deduct gifts from taxes, but also subjects the fund to Internal Revenue Service restrictions.

Ben Tesdahl, a lawyer in Washington, D.C., specializing in nonprofit law, told AP the law is designed to ensure that such organizations help a large segment of the community and not a small, specific group.

The IRS generally wants the nonprofit to determine the need of the recipients and distribute money on that basis, he said.

“At some point, once their need is fulfilled, you don’t just keep dumping the money on them and make them rich,” Tesdahl said.

Other relief funds have faced similar problems.

The Denver-based Mile High United Way gave out $4.6 million after the Columbine High School shootings.

After weighing the needs of victims and the intent of the donors, United Way representative Kelly Cahill told AP, the group gave $3 million to victims and the rest to community programs and services.

The Telegram & Gazette will set up a community board independent of the newspaper to make decisions about how to give out the money.

The newspaper hopes to begin distributing funds in September.

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