Disclosure Requirements For Quid Pro Quo Contributions
A “quid pro quo” contribution is one made partly as a contribution and partly in consideration for goods and services provided to the donor by the donee organization. A donor may only take a charitable contribution deduction to the extent that his/her contribution exceeds the fair market value of the goods or services received in return for the contribution; therefore, donors need to know the value of the goods or services.
Unit Responsibilities for Hosting Events
This applies only to those events where a donor’s annual giving has qualified him or her to attend free of charge. It does not apply to invitations for events that charge for attendance. It also does not apply to donors invited on the basis of cumulative giving over multiple years (historical giving) or planned gifts that have not been received.
The following language should be included on all invitations to events based on giving, with the value and contact information to be completed by the school or college:
“In accordance with IRS guidelines, we are notifying you that the estimated value of attendance at this event is $XX.XX per person, and is a benefit resulting from your annual charitable contribution. You may decline this benefit if you choose by calling (706) 542-XXXX or by emailing firstname.lastname@example.org, or you may make a non-tax deductible payment in that amount.”
Per IRS Publication 526, the tax-deductible amount of a donor’s gift is reduced by the fair market value of any resulting benefits, and the charitable organization is responsible for disclosing these values to the donor. The donor should be given the opportunity to decline the benefit to maintain the full tax-deductibility of their gift, or alternatively, the donor may make payment for the benefit and thus take full tax-deductible credit for the original gift. By including the above language, we have met all of those requirements.
Please forward to Gift Accounting a sample invitation and the final list of invitees prior to each recognition event.
Fair Market Value (FMV) is based on a reasonable estimate of what the donor would expect to pay to receive similar benefits and/or privileges unrelated to their charitable giving. Assuming the event is comparable to other area events (e.g. theatrical, musical or athletic performances) for which admission charges already exist, those established charges should be used to determine the fair market value (i.e. non-tax deductible portion) of admission. Where the event has no such counterpart a reasonable estimate of the benefit received still must be determined. The value of food, beverages and/or entertainment are examples of benefits to be considered. Note: Fair Market Value is not necessarily based on the actual or projected cost of the event, particularly when the event is sponsored in whole or in part by vendors. The savings to the organization hosting the event has no bearing on the benefits received by the participants.
An account administrator must not be able to derive any direct benefit from a contribution they make. If the account administrator receives a payment from the account he or she has contributed to, and it is deemed to be a “private benefit,” the gift will be disqualified (per Internal Revenue Code Section 170(c)(2)(c)). The Account Administrator cannot be the major donor to an account for which they are an authorized signer.
Last Updated on June 21, 2019