2013 Page 3 The BDO Institute for Nonprofit Excellence Check out our new nonprofit blog at www.nonprofitblog.bdo.com www.nonprofitblog.bdo.com
2013 Page 4 Agenda The Basics of Charitable Acknowledgement -I will use “receipting” and “acknowledgement” interchangeably in this presentation Special Circumstances and Events Question and Answer
2013 Page 5 The Basics of Charitable Gift Acknowledgement All contained in IRS Publication 1771 http://www.irs.gov/pub/irs- pdf/p1771.pdfhttp://www.irs.gov/pub/irs- pdf/p1771.pdf To get charitable deduction, donor must receive a written acknowledgement for charity for contributions of $250 or more. Can be done for each contribution or an annual summary. Do not need aggregate letter if donor gave a number of small contributions (church collection basket, for example)– but helpful to the donor Note: it is good practice to send acknowledgement to all donors whatever the size of donation Should be sent by Jan 31 of following year, donor must receive by earlier of date filing tax return or the due date of the return, including extensions in order to get deduction May be hard copy or email
2013 Page 6 Elements of Basic Cash Donation of $250 or More (no goods or services received by donor) Name of organization Amount of cash contribution Statement that no goods or services were received in exchange for the contribution Should have date of contribution, or if aggregate, the year of the aggregated contributions Does not require donor social security number or your EIN May wish to include statement the your organization is a 501(c)(3) and to consult with tax advisor for questions about charitable donations
2013 Page 7 The Basic Non-Cash Donation (no goods or services received by donor) Same elements as cash except: Must describe the item given (e.g., 20 shares of IBM stock or Apple iPhone 5) Do not place a value on the item given! That is the donor’s responsibility Donated services (e.g., legal or accounting) or free use of facilities are not eligible for charitable deduction so do not give receipt for these Appraisal and special forms required for certain large non-cash donations and vehicle donations– to be discussed later
2013 Page 8 If Goods or Services are Received by Donor ($250 or more cash donation) Organization must make good faith estimate of fair market value (FMV) of the goods or services received Receipt should provide total amount donated and also state the value of goods/services and say that the charitable donation is limited to the amount of donation in excess of the FMV Token value exception: FMV does not exceed lesser of 2% of donation or $96 or only item received is name/logo item (e.g., coffee mug) with value of $9.60 (these values are indexed for inflation) Free, unordered low cost articles are also excluded
2013 Page 9 Quid Pro Quo Donations of $75 or More (donor gets goods or services in return) When donor pays $75 or more and gets something in return, the value must be disclosed (but not necessarily on an acknowledgement letter, unless $250 or more) Failure to so disclose can result in penalties; Form 990 asks if you did comply For less than $250, the disclosure can be made on the ticket or solicitation for the event (must be prominent) Example: Gala event with ticket cost of $100 but value of meal is $40. The ticket must disclose that goods and services are $40 and that charitable deduction is limited to $60. Or this can be on an acknowledgement letter after the event (or both). Note: when preparing the 990, the charitable contribution element of the special event will be number of tickets times the charitable contribution value
2013 Page 10 Payroll Deduction Contributions It would be impossible in many cases for a UW to come up with acknowledgement letters because the amounts are sent in aggregate from the employer and not itemized by employee—so IRS does not make you do this To take deduction for $250 or more contributed, the donor needs two things: A pay stub, W-2, or other document from employer showing withholding amounts paid to charity A pledge card that indicates not goods or services were received in exchange for the contribution(be sure yours has this magic language) It would be impossible in many cases for a UW to come up with acknowledgement letters because the amounts are sent in aggregate from the employer and not itemized by employee—so IRS does not make you do this
2013 Page 11 And Now, Issues Not Addressed in Pub 1771 Charity Auctions – live or silent Must give non-cash receipt to donors for items donated Helpful to get an estimated FMV from donors On your program or item listings, prominently show the FMV for each item Program should also say that charitable donation is limited to any amounts paid in excess of FMV (many times there is no charitable deduction) Send out acknowledgements if they pay $250 or more (same as with a cash donation with goods or services in exchange)
2013 Page 12 Third Party Programs/ Workplace Campaigns In order for donor to receive a deduction, the third party should be acting as an agent for UW, otherwise the only party making the donation is the third party If there is agency, same acknowledgement rules apply Although probably best to maintain control over the receipts, you could authorize the third party to send acknowledgements, but they need to have proper format and you should get copies.
2013 Page 13 Raffles The rule here is simple: no charitable deduction on a raffle ticket (based on IRS premise that the FMV of a game of chance is equal to its price) Even charity raffles may be considered games of chance by certain states, so see if any licensing or permit is required Don’t forget to send 1099’s if prize is worth $600 or more
2013 Page 14 Stock Donations As with other non-cash donations, do not value on the acknowledgement, but just describe (e.g. 10 shares of IBM) Even if you sell it in a day or so, it gets reported a contribution on your income statement. It should be booked at the average stock exchange price for that stock on that day, not the price that it was sold for (which we see a lot) When you do sell it, it is reported on financials and 990 as a sale of security Even when the amount is large, it is excluded from valuation and other reporting requirements discussed later, unless it is a closely held stock or investment with no ready market Be wary of S-Corp stock donations– all of the income of S-Corps is taxable to nonprofits. If you do take such a donation, sell it ASAP
2013 Page 15 Vehicle Donations Cars, Boats, Motorcycles, Aircraft Because of a lot of abuse (inflated donation values for junkers and charities only getting a fraction of the selling price), the rules changed a few years back and no longer does donor automatically get Blue Book value for donation (unless the vehicle is used by the organization for exempt purposes) Now must provide Form 1098-C to donor, which reports selling price of the vehicle if sold after the donation or if the vehicle is kept and used by the organization Check with tax advisor if getting vehicles as this is complex area
2013 Page 16 Form 8283 For non-cash contributions Required for donors to take deduction for non-cash greater than $500 For items less than $5,000 and most stock donations, this form is filled out only by the donor and attached to his/her return For items valued at greater than $5,000, signature by independent appraiser is generally required as well as signature by the donee organization. This is still filed by the donor with his/her return Separate independent appraisers report only required to be attached for art valued at over $20,000, conservation easements or donations greater than $500,000 (we should be so lucky!) Although the donor is responsible for this reporting and getting forms to the organization if signature is required, it is very helpful in many cases if the organization can provide a little help to the donor, if nothing more than saying that there is additional reporting/appraisal required and to see a tax expert for guidance
2013 Page 17 Form 8282 For Sales/Dispositions of Donated Property Required if the charity sells donated items which had donated value of $5,000 or more (excludes publically traded stock) within 3 years of donation Also excludes items consumed or distributed for charitable purpose by the organization (e.g., house given to disaster victim) Must be filed with the IRS within 125 days of sale/disposition (with a few exceptions) If sold for a lot less than donor claimed, can cause obvious problem for the donor!
2013 Page 18 Form 990 Contribution Reporting Both cash and non-cash contributors get listed on Schedule B You cannot put “anonymous” as name of donor on Schedule B– if someone wants to be anonymous you should get them to sign form saying you will keep them anonymous except where required by IRS or other law. Schedule B is redacted on public inspection copies of the 990 and on Guidestar so donor identity is protected from public Must disclose total of non-cash contributions on Form 990 (do not include donations of services or use of facilities) Schedule M is required if non-cash is greater than $25,000 (some detail is required, so keep records) Special events– the donation portion of the income is reported as contribution, while the rest is event income
2013 Page 19 Gift Acceptance Policy A good idea to have one in place giving the organization discretion in accepting unusual gifts (after all, who wants to be stuck with a time-share or unmarketable S-Corp stock?) If you have to prepare Schedule M, this is a question that is asked on the 990
2013 Page 20 Questions & Answers To ensure compliance with Treasury Department regulations, we wish to inform you that any tax advice that may be contained in this presentation (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax related penalties under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein. Material discussed in this tax presentation is meant to provide general information and should not be acted on without professional advice tailored to your organization’s individual needs.