Disclose to Donor How Much of Their Contributions are Deductible

Here is some valuable information on IRS rulings on donor

contributions and deductions. Hope you find this information helpful.

Does your organization hold a special event where dinner or entertainment is provided? Do you give contributors a subscription to a magazine or promotional merchandise (a mug, book, etc.)? Do you provide donors with membership benefits in return for a contribution?

If so, your organization needs to be familiar with the IRS rules that apply when donors receive something in exchange for their contribution. You should know the following:

The IRS presumes that donations are not tax-deductible — The IRS requires taxpayers to prove that the amount they pay exceeds the fair market value of the food, entertainment, merchandise, or other goods and/or services that the donor receives.

You should NOT state in solicitation materials, catalogs, or tickets that the donor’s payment is tax-deductible if the donor is receiving something of value in exchange for the contribution.

The IRS is clamping down on organizations which do not follow the disclosure requirements — A law enacted by Congress in 1993 establishes strict rules governing the sale of tickets for special events, the sale of auction items, and other situations where the donor is receiving something of value in return for his/her donation.

After years of advising charities that they should tell donors that some portion of the ticket price is not tax deductible, and years of frustration in watching frequent and flagrant violations of this rule, the IRS is clamping down.

Disclose It: A Charitable Nonprofit’s Guide to Disclosure
The Standards of Excellence Institute