Contributions
Charitable organizations described in §501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with §170.
A charitable organization must provide a written disclosure statement to donors of a quid pro quo contribution in excess of $75. A quid pro quo contribution is a payment made to a charity by a donor partly as a contribution and partly for goods or services provided to the donor by the charity. For example, if a donor gives a charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. In this example, the charitable contribution portion of the payment is $60. Even though the part of the payment available for deduction does not exceed $75, a disclosure statement must be filed because the donor's payment (quid pro quo contribution) exceeds $75. 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 goods or services provided by the charity, and provide the donor with a good faith estimate of the 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 the associated contribution is actually received. No disclosure statement is required when:
The goods or services given to a donor meet the standards for "insubstantial value" set out in Rev. Proc. 90-12, 1990-1 C.B. 471, and Rev. Proc. 92-49, 1992-1 C.B. 987 (as updated); There is no donative element involved in a particular transaction with a charity (for example, there is generally no donative element involved in a visitor's purchase from a museum gift shop); or There is only an intangible religious benefit provided to the donor. The intangible religious benefit must be provided to the donor by an organization organized exclusively for religious purposes, and must be of a type that generally is not sold in a commercial transaction outside the donative context.
A penalty is imposed on a charity that does not make the required disclosure in connection with a quid pro quo contribution of more than $75. The penalty is $10 per contribution, not to exceed $5,000 per fund-raising event or mailing. The charity can avoid the penalty if it can show that the failure was due to reasonable cause. Donors taking a deduction under § 170 are required to obtain contemporaneous written substantiation for a charitable contribution of $250 or more. To be "contemporaneous" the written substantiation must generally be obtained by the donor no later than the date the donor actually files a return for the year the contribution is made. If the donee provides goods or services to the donor in exchange for the contribution (a quid pro quo contribution), this written substantiation (acknowledgment) must include a good faith estimate of the value of the goods or services. The donee is not required to record or report this information to the IRS on behalf of a donor. The donor is responsible for requesting and obtaining the written acknowledgement from the donee. Although there is no prescribed format for the written acknowledgment, it must provide sufficient information to substantiate the amount of the contribution.
For more information, see Updated on Disclosures and Substantial Rules. Also see IRC 6700 and IRC 6701 and Charitable Contribution Deductions.