Quid Pro Quo Contributions of More Than $75
If your organization receives a contribution of more than $75 and then gives the donor goods or services in return (sometimes called a "gift premium"), you must provide the donor with a written disclosure statement that includes the following:
- a statement that the donor can deduct, for tax purposes, only the difference between the value of the donation and the value of any gift premium received.
- A good faith estimate of the fair market value of the gift premium given to the donor in exchange for the donation. You may use any reasonable method to estimate the fair market value of the premium, as long as you do so in good faith.
Example: Your organization receives $150 from a donor and you provide him with two tickets to a musical performance that are worth $50. Your disclosure statement would say:
"Thank you for your generous donation of $150. Please note that only the portion of your contribution that exceeds the value of any gifts you receive is tax-deductible. The estimated fair market value of your gift, two concert tickets, is $50 total."
The disclosure must be given either when you solicit a donation from the donor or when the contributor makes the donation. You only have to do it once.
In some cases, the gift received might be of "insubstantial benefit" as defined by the IRS. Such a benefit is less than 2% of the donation or $82, whichever is less. For example, you might provide a coffee cup or tote bag for a gift of $500 or more. The value of the gift will be of "insubstantial benefit." Be sure to check the IRS website for up-to-date information about this.
Contributions of $250 or More
Donors who give your organization $250 or more may deduct a charitable contribution of that amount only if they have a written acknowledgment of their donation from your nonprofit. It is the donor's legal responsibility to ask for such an acknowledgment, but wise nonprofits will always provide the statement to its donors.
Although the statement is not due until the donor has to file his/her tax return, good practice is that you provide the statement at the time of your "thank you" for the donation. And that acknowledgment should be sent promptly after receipt of the contribution.
Your statement should contain at least:
- a statement of the amount of the donation (if cash)
- a description of the property donated (if property)
- a statement of whether your organization provided goods and services in return for the donation (a good faith estimate of the value of the goods/services provided must be included if goods or services were indeed provided in return for the donation)
This information must be provided in writing, at the time of the solicitation or when the payment is received, and in a way that will come to the attention of the donor.
Some purchases, such as at a gift shop, do not require disclosure if no gift or donation was intended.
For more information on disclosure and substantiation rules, see IRS Publication 1771, Charitable Contributions--Substantiation and Disclosure Requirements at the IRS website, or by calling 1-800-TAX-FORM.