As the nonprofit fundraising season ramps up, make sure your nonprofit fundraising strategy is dotting all its i’s and crossing all the t’s. IRS rules for receiving and acknowledging donations can be found in IRS Publication 1771. Some important highlights include:

  1.  Donors are responsible for obtaining a written acknowledgment from a charity for any single contribution of $250 or more before the donors can claim a charitable contribution on their federal income tax returns.
  2.  Charitable organizations are required to provide a written disclosure to a donor who receives goods or services in exchange for a single payment in excess of $75.  

What’s this mean for my operations?
Nonprofit Industry BEST PRACTICE is to give a receipt for all donations!

Scenario A: When should I to send a written acknowledgement of a donation?

When receiving donations greater than $250 (including in-kind donations) a written acknowledgement must be sent. Be sure to collect address information, full name, and save the donors on a list so you can complete your mailing before the donor needs to file their taxes!  Below is a template for a written acknowledgement that you can email, send electronically through your online donation system or even through the mail. The template is designed for both in-kind and cash donations. Although the IRS states $250 requires a receipt, best practice is for all donations to receive a receipt.

This receipt can be a template format where you simply change the donor’s information. CANDO! Has a free template for your convenience, feel free to change whatever information you need.

Get your Written Acknowledgement of Nonprofit Donation Template

Scenario B: When is a disclosure statement needed?

When a donor makes a payment of $75 or great to a charity partly as a contribution and partly for goods or services, then a disclosure statement clarifying the deductible portion of the payment is needed. This is common in silent auction scenarios, fundraiser events, etc. For example: if a donor gives a charity $90 and receives a meal valued at $20, the donor has made a quid pro quo contribution. The charitable contribution part of the payment is $70, calculated by subtracting the value of goods and services from the total contribution. Even though the deductible part of the payment is not more than $75, a disclosure statement must be provided by the organization to the donor because the donor’s payment (a ‘quid pro quo’ contribution) is more than $75. Failure to make the required disclosure may result in a penalty to the organization.

Note: There is some other fine print  exempting quid pro quo exchanges around membership benefits, smaller value items, ‘tokens’, and intangible religious benefits.

“[A] required written disclosure statement must:

  1. Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of any money (and the value of any property other than money) contributed by the donor over the fair market value of goods or services provided by the charity, and
  2.  Provide the donor with a good faith estimate of the fair market value of the goods or services that the donor received.  The charity must furnish the statement in connection with either the solicitation or the receipt of the quid pro quo contribution.  If the disclosure statement is furnished in connection with a particular solicitation, it is not necessary for the organization to provide another statement when it actually receives the contribution.”

Here are some examples of quid pro quo donation disclosure statements.

IRS Disclosure Statement Sample

On a fundraising ticket or sale item description or offer (eg. the solicitation):

Only the difference between the fair market value of this item and your contribution is deductible on your federal income taxes. This item’s fair market value is approximately $Y, which must be subtracted from your contribution ($X) to calculate the deductible amount ($Z).

In a receipt for a quid pro quo contribution:

Your federal income tax deductible amount for this contribution is $Z. This is calculated by deducing the market value of the item(s) received ($Y) from the total contribution ($X).