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Non-Profit Organizations

Substantiating Charitable Contributions Received

By November 19, 2015No Comments

Potential donors may want to confirm that a charitable organization is a qualified organization and that their contributions are eligible for a tax write off. Exempt Organizations Select Check is a searchable database of eligible organizations (excluding certain churches, group ruling subordinates, and governmental units) that potential donors may use to verify the validity of their donations. A link to the search engine is provided below.

A key component regarding deductible donations is substantiating the charitable contributions with documentation.

A charitable organization must provide a written disclosure statement to donors of an outright donation or 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. The required written disclosure statement must:

  1. 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
  1.   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.

There are certain situations when a disclosure statement is not necessary. (Specific situations are listed in the document linked below.) However, when required to make the disclosure in connection with a contribution of more than $75, there is a penalty ($10 per contribution) associated for non-compliance.

For noncash contributions of less than $250, a receipt, letter, or other written acknowledgement from the charity must be provided showing:

  1. 1. The name of the charity
  2. The location and address of the charity
  1. A description in sufficient detail of the property contributed.

In situations when a donation is left at a charity’s unattended drop site, providing a written receipt is deemed impractical and thus not required by the IRS.

It is important to note that it is not the donee’s responsibility to obtain the original cost or basis of the property, the fair market value of the property at the time of donation, or the method of deriving the property’s fair market value. These responsibilities fall on the donor. (For more details on requirements for donor charitable contribution substantiation please see our article titled “Charitable Contributions Substantiation” linked below.)

For noncash contributions of at least $250 but not more than $500, in addition to the required information stated above, the charity’s written acknowledgment must also include whether or not the charitable organization gave any goods or services as a result of the contribution (a quid pro quo contribution), a description of what was given, and a good faith estimate of the value of any goods or services. If the only benefit received was an intangible religious benefit the acknowledgement must say so and does not need to describe or estimate the value of that benefit.

There are two other important noncash contributions donation ranges that effect donors, not donees, in regards to noncash contributions. For noncash contributions over $500 but not over $5,000, donors are required to report the date of acquisition of property and any adjustments to the basis. For noncash contributions over $5,000 the donor must obtain a qualified written appraisal of the donated property from a qualified appraiser.

As you can see, charitable contributions can be complicated. Please call us if you have further questions regarding documentation and substantiation of your received charitable contributions.

Link to IRS exempt organizations search engine:

https://apps.irs.gov/app/eos/mainSearch.do?mainSearchChoice=pub78&dispatchMethod=selectSearch

Link to IRS article:

https://www.irs.gov/Charities-&-Non-Profits/Substantiating-Charitable-Contributions

Link to Charitable Contributions Substantiation for Donors:

To view requirements for donors regarding charitable contribution substantiation click here.

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