Acknowledging donors’ contributions is important not only because of IRS requirements, it also helps in building donors’ confidence in and support for the activities they help to fund. Organizations should establish procedures for acknowledging contributions in a timely manner and for providing appropriate receipts for cash contributions if requested. Regular updates to donors on the activities they support is another way to build trust and loyalty, as is providing ways for contributors to find more information on their own—say, through a website, print publications or visits to the organization’s office.

• Contributions to charitable organizations may be tax deductible. The IRS has established requirements that must be met by both the organization and the donor.
• The charitable organization does not assess the value of a gift; that is the responsibility of the donor in his or her personal tax filing. 
• The charity must provide a fair market value for anything it gives in return for a gift.

• Gifts given to nonprofit organizations exempt from taxation under 501(c)(3) status are tax deductible.
• Charities are required to provide a written acknowledgment of gifts of $250 or more, and donorscannot claim a deduction without such an acknowledgment. In addition, donors cannot claim a deduction for any cash contribution, regardless of amount, without written evidence of the contribution such as a cancelled check, acknowledgment letter, or other receipt. 
• If the donor receives something in return for the donation, the difference between the amount of the donation and the value of the item received is deductible. 
• In quid-pro-quo contributions of $75 or more, where the donor receives something of more than token value in return, the organization must provide a written statement indicating that the deductibility is limited to the excess amount paid. The statement must include a good-faith estimate of the value of the goods or services.

Federal law requires charitable organizations to provide a written disclosure statement to donors who contribute more than $75 if the organization has provided the donor with goods or services in exchange for the contribution.¹ The 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 the amount of any money (and the value of property other than money) contributed by the donor over the value of the goods or services provided to the donor by the charity, and must provide a good faith estimate of the value of the goods or services received by the donor. The IRS indicates on its website that no disclosure statement is required if “the goods or services given to a donor have insubstantial value.”² A taxpayer who itemizes deductions on his or her annual income tax return is required to have a contemporaneous written acknowledgement from the charitable organization to substantiate deductions for contributions of $250 or more.³ The written acknowledgement must include the amount of cash and a description (but 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; and a description and good faith estimate of the value of any goods or services received by the donor.⁴ For tax years beginning after August 17, 2006, taxpayers are required to have bank records or a written communication from the organization (indicating its name and the date and amount of the contribution) to substantiate a deduction for a charitable contribution of any amount.⁵

For non-cash contributions, the taxpayer is generally allowed to deduct the fair market value
of property donated to a public charity or to a federal, state, or local governmental entity. The
amount that taxpayers may deduct varies depending on the type of property contributed, the type of organization to which the property was contributed, and the taxpayer’s income. In the case of tangible personal property (e.g., artwork), the taxpayer is entitled to a fair market value deduction only if the property is given to a public charity that uses the property in its exempt purposes. If the taxpayer is claiming a deduction of more than $500 for any single item other than publicly traded stock, the taxpayer must submit Form 8283 (Noncash Charitable Contributions) with his or her tax return. If the deduction claimed for any single item (other than publicly traded stock) exceeds $5,000, the taxpayer must have the item appraised by a qualified appraiser, then attach to the tax return a copy of the appraisal, a signed declaration of the appraiser, and a signed acknowledgement from the charitable organization that received the donation. If the charity sells contributed property valued at $5,000 or more within three years of the property’s receipt, the charity must file Form 8282 (Donee Information Return), which reports that sale to the IRS.⁶ For tax years beginning after August, 2006, taxpayers
can only claim deductions for clothing and household items donated to charity if the items are in
good used condition or better.⁷

1. The value of acknowledging contributions goes beyond assisting donors with taking applicable tax deductions and includes building goodwill for the organization.What steps are we taking and what others could we take to maximize goodwill?
2. What information should be used to estimate the fair market value for products and services that are received in exchange for a donation?

27 Accuracy and Truthfulness of Fundraising Materials