Noncash contributions

Just as is the case for monetary contributions, donors are responsible for obtaining a contemporaneous written acknowledgment from a charitable organization for any single noncash contribution valued at $250 or more before donors can claim a charitable deduction on their federal income tax returns. Additional validation requirements may apply to noncash contributions and these requirements can be complicated. They depend on the type of property contributed and the claimed value of the property contributed. See Form 8283 and its instructions as well as Publication 526 for additional information.

Goods or Service Contributions

Generally, a donor’s deduction for a contribution to a nonprofit organization is limited to the fair market value of the contribution minus the fair market value of the goods or services the donor receives from the organization in exchange for the contribution. Goods or services include cash, property, services, benefits, or privileges.

However, there are three important exceptions for goods and services which do not have to be described in the contemporaneous written acknowledgment.

• Token Exception – Goods or services that have insubstantial value that a charitable organization provides in exchange for contributions.
  Good and services are considered to be of insubstantial value if the payment the donor makes occurs in the context of a fundraising campaign, the charitable organization informs the donor as to the amount of the payment that is a deductible contribution, and:
  1. the fair market value of the goods and services the donor receives does not exceed the lesser of 2 percent of the donor’s payment or $132,* or
  2. donor’s payment is at least $66,* the only goods or services the charitable organization provides bear the organization’s name or logo (for example, calendars, mugs, or posters), and the cost of these items, in the aggregate, is within the limit for “low-cost articles,” which is $13.20.*

  Low-cost articles a charitable organization sends for free to taxpayers who have not ordered these articles are also considered to be of insubstantial value; examples include mailing labels or greeting cards.

• Membership Benefits Exception – An annual membership benefit is also considered to be insubstantial if it is provided in exchange for an annual payment of $75 or less and consists of annual recurring rights or privileges, such as:
  1. free or discounted admissions to the charitable organization’s facilities or events
  2. discounts on purchases from the organization’s gift shop
  3. free or discounted parking
  4. free or discounted admission to member-only events sponsored by the organization, where a per-person cost (not including overhead) is within the “low-cost articles” limits
• Intangible Religious Benefits Exception – If a religious charitable organization provides only “intangible religious benefits” to a donor, the contemporaneous written acknowledgment does not need to describe or value those benefits. It can simply state that the organization provided intangible religious benefits to the donor.

Quid Pro Quo Contributions

Donors may only take a contribution deduction to the extent that their contributions exceed the fair

market value of the goods or services the donors receive in return for the contributions; therefore, donors need to know the value of the goods or services. A contribution made by a donor in exchange for goods or services is known as a quid pro quo contribution.

An organization must provide a written disclosure statement to a donor who makes a payment exceeding $75 partly as a contribution and partly for goods and services provided by the nonprofit organization. A penalty is imposed on charities that do not meet the written disclosure requirement. The penalty is $10 per contribution, not to exceed $5,000 per fundraising event or mailing.

Example of a Quid Pro Quo Contribution: A donor gives a charitable organization $100 in exchange for a concert ticket with a fair market value of $40. In this example, the donor’s tax deduction may not exceed $60. Because the donor’s payment (quid pro quo contribution) exceeds $75, the charitable organization must furnish a disclosure statement to the donor, even though the deductible amount doesn’t exceed $75.

A Required Written Disclosure Statement 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 nonprofit organization
• provide the donor with a good faith estimate of the fair market value of the goods or services

An organization must furnish a disclosure statement in connection with either the solicitation or the receipt of the quid pro quo contribution. The statement must be in writing and must be made in a manner that is likely to come to the attention of the donor. For example, a disclosure in small print within a larger document might not meet this requirement.