Summary of Federal Laws
Tax Issues Related to Donations
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Quid Pro Quo Rules
Payments made partly as a contribution and partly for goods or services are known as "quid pro quo" contributions. For quid pro quo contributions, per I.R.C. § 6115, the charity must furnish disclosure statements when the donation is in excess of $75. This requirement is separate from the written substantiation required for deductibility purposes. In cases where the organization has provided goods or services to the donor in exchange for making the contribution, the written acknowledgment must include a good faith estimate of the value of such goods or services. If the goods or services consist solely of intangible religious benefits, a statement to that effect should be included. Also, goods or services of insubstantial value under IRS guidelines may be disregarded. Certain membership benefits may be disregarded when they are provided in return for a payment to the organization. This includes benefits given as part of an annual membership offered in return for a payment of $75 or less and which fall into one of the following two categories: 1) admission to events open only to members and for which the donee reasonably projects that the cost per person will be less than or equal to the standard for low cost articles under I.R.C. § 513(h)(2)(C) or 2) rights or privileges that members can exercise frequently during the membership period. These same goods or services may also be disregarded when provided to the donor's employees.
The 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 any money (and the value of any property other than money) contributed by the donor over the value of the goods or services provided by the charitable organization; and
provide the donor with a good faith estimate of the value of the goods or services that the donor received.
The statement must be furnished either at the time of the solicitation or when the contribution is actually received.
The disclosure statement is not required when the goods or services meet the standards for insubstantial value, when there is no donative element involved (e.g., a museum gift shop sale), or where there is only intangible religious benefit provided to the donor. A taxpayer may deduct 80% of the amount paid to the educational institution which would otherwise be a charitable contribution deduction but for the fact that the taxpayer receives the right to purchase athletic tickets. A penalty is imposed on charities that do not meet the disclosure requirements.
CCR updated CFR link 6/30/15