Documentation Requirements For Charitable Contributions

IRS regulations require you to provide donors with documentation regarding the value of their gifts. These requirements vary with the donation’s type and worth. They are best understood by reviewing them in terms of the amount and type of contribution.

Cash Contributions
Of $250 or More in a Single Gift To deduct a single cash gift of $250 or more, a donor must have a written acknowledgment of the contribution from the charity. The burden of requesting the written acknowledgment
falls on the donor, but the charity must provide adequate documentation in response. Note that contributions made over the course of a year generally aren’t aggregated for the $250 or more test.

Quid Pro Quo Contributions
Tax rules require charities to inform donors, in writing, of the value of any benefits received in exchange for contributions. The charity also must state that the deduction is limited to the excess of the contribution over the value received. This documentation is required when a donor contributes $75 or more and receives goods or services worth
more than a minimal amount. (See below.)

The quid pro quo reporting requirement does not apply if the value of goods and services received by the donor falls under either of
two de minimus exceptions:

• The contribution is at least $36 and the cost to the charity of the goods and services received by the contributor does not exceed $7.20, or

• The cost to the charity of the goods and services received by the contributor does not exceed 2% of the contribution’s value or $72, whichever is smaller. A $60 gift to a donor who contributed $3,000 would qualify under this provision. But keep in mind that these amounts can
change every year.

This provision provides relief for organizations that conduct fundraising and enclose a gift with the request, or that provide gifts in exchange for a contribution.

Noncash Contributions Of $251 to $500
Donors must get a written acknowledgment for noncash gifts — the same as for cash contributions — in excess of $250. Charities do not have to estimate the value of the donated items. The donor makes this valuation.

Noncash Contributions Of $501 to $4,999
For noncash contributions of $501 to $4,999, donors must get written acknowledgment of their gifts and complete Form 8283 as part of their annual income tax returns. This form requires:

• The date, value and original cost of the donated items,

• The charity’s name and address, and

• The method of valuation.

Noncash Contributions Of $5,000 and Up
For noncash contributions of $5,000 and more, donors must obtain a qualified appraisal unless they contributed marketable securities that are regularly traded on the open market. Donors must attach Form 8283, signed by both appraiser and the charity, to their federal income tax returns.

Written Acknowledgment Rules
No specific form exists for written acknowledgments, but they must contain the following information:

• The amount of cash and/or a description (not the value) of any property — other than cash — contributed,

• Whether the charity provided any goods
or services in consideration, in whole or
in part, for the contribution,

• If so, a description and good-faith estimate of the value of those goods or services, if any, or, if the services consist entirely of intangible religious benefits, a statement to that effect. Intangible religious benefits are not considered quid pro quo amounts that reduce an individual’s tax deduction. An example is admission to a religious ceremony. See the acknowledgment samples at the end of this report. Note that the donor’s name and Social Security number are not required on the acknowledgment.

IRS Regulations
The IRS has issued regulations on contributions made through payroll deductions. It considers these contributions substantiated by a combination of paystub or other employer statement and a charity-issued pledge card stating that the organization did not provide goods or services in exchange for the contribution.

Complicated Rules
The charitable contribution reporting requirements add complexity to an already difficult area for charities and their donors. A clear understanding of these rules is essential for both. Please call us if you need assistance.