What Receipts Does A Nonprofit Give Donors?

What Receipts Does A Nonprofit Give Donors?

If your organization is exempt under Section 501(c)(3) of the Internal Revenue Code, many of the donations you receive will be tax deductible to your donors. However, with that benefit comes IRS requirements for documentation of donations. Below are the basic requirements of what information you need to provide to donors about their contributions:

Gifts with Value of $250 or More (Cash or In-Kind)

Although not a technical requirement, the organization should provide a “contemporaneous written acknowledgement” that contains the following information:

  • Name of the organization

  • Amount of cash contribution or description (but not value) of non-cash contribution)

  • Statement that no goods or services were provided by the organization in return for the contribution (if applicable) OR

  • Description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution (unless the token exception applies) OR

  • Statement that goods or services, if any, that an organization provided in return for the contribution consisted entirely of intangible religious benefits, if applicable.

A separate acknowledgement can be provided for each single contribution of $250 or more, or one acknowledgement can be used for a series of contributions. Separate contributions of less than $250 will not be aggregated.

The acknowledgement should be provided no later than January 31 of the year following the donation.

Token Exception: An organization does not need to describe goods or services it provides in exchange for the donation if:

  • The fair market value of the benefits received does not exceed the lesser of 2% of the payment or $105; OR

  • The payment is at least $52, the only items provided bear the organization’s name or logo, and the cost of these items is within the limit for “low-cost articles,” which is $10.50 (tax years 2015 and subsequent); OR

  • The organization mails or distributes low cost articles for free without any order, request, or consent by the donor for the item and the organization informs the donor that the items are theirs to keep.

More information is available at: IRS Publication 1771, Charitable Contributions – Substantiation and Disclosure Requirements.

Gifts with Value of More Than $75 and You Give Something in Return

A donor can only take a tax deduction for a donation in the amount that the donation exceeds the fair market value of goods or services received in exchange. If your organization provides any goods or service to donors or prospective donors in exchange for a payment of more than $75, it must provide a written good faith estimate of the value of goods or services provided in exchange for the donor’s contribution.

The written disclosure must:

  • Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of money (and the fair market value of property other than money) contributed by the donor over the value of goods or services provided by the organization; and

  • Provide the donor with a good-faith estimate of the fair market value of the goods or services provided.

Your organization can use any reasonable methodology to estimate fair market value, as long as it is applied in good faith.

Exceptions: The disclosure requirement does not apply:

  • If the goods or services provided fall within the “token exception” described above, the “membership benefits exception” or the “intangible religious benefits exception” (see IRS Pub 1771 below).

  • Where there is no donative element involved such as a thrift store sale.

The written disclosure must be provided as part of the solicitation or the substantiation receipt described above. Special rules apply to telemarketing.

The Internal Revenue Service may impose a penalty of $10 per contribution, not to exceed $5000 per fundraising event or mailing, for failure to provide this written disclosure.

Noncash Gifts With Value Over $5,000

If your organization receives a donation of property worth more than $5,000, the donor will have to get an appraisal in order to take a tax deduction and will need to file Form 8283 with his or her annual return. Your organization will be asked to sign that form and you may be the one to generate the form. If your organization then disposes of that property within 3 years of its contribution, you will have to report the sale and sale price, a description of the use of the property and a statement indicating whether the use was related to your organization’s purposes on Form 8282.

Special rules apply to vehicle donations. See http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/IRS-Guidance-Explains-Rules-for-Vehicle-Donations.

Gift Acceptance Policy

If your organization anticipates receiving a significant number of noncash gifts, such as personal property (art, furniture, other items), real property, or securities, or if your organization would be interested in setting up a planned giving program, you should consider putting into place a gift acceptance policy. This policy will govern the circumstances in which your organization will accept a gift so you can avoid accepting something that may end up being more trouble than it is worth. It can also establish procedures for your staff to recognize gifts and give them grounds for denial of a gift without offending the donor. Gift acceptance policies range from extremely simple to very lengthy and comprehensive. Some examples and further guidance is available at: http://www.councilofnonprofits.org/nonprofit-gift-acceptance-policy.

 Written by Cameron Holland.