A charitable organization must provide donors with specific acknowledgments of charitable contributions, in accordance with IRS requirements, as well as information to facilitate the donors’ compliance with tax law requirements.
Acknowledging donors’ contributions is much more than a tax requirement, it is a critical part of building donors’ confidence in and support for the activities they help to fund. Organizations should establish procedures for acknowledging all contributions in a timely manner, whether by mail or electronically. Donors must have written documentation to claim a tax deduction for charitable contributions on their annual income tax returns, and that documentation must come from the charitable organization for gifts of $250 or more. Charitable organizations are required to make a good faith estimate of the value of any goods and services (such as a meal at a fundraising banquet) the donor received in exchange for a contribution of more than $75. IRS publication 526 provides more information on the requirements for charitable organizations, including exceptions for benefits considered to be insubstantial, certain membership benefits, and intangible religious benefits.
In addition to thanking donors for their contributions, such acknowledgements should indicate how the donor can find more information on the activities they support through a website, print publications or visits to an organizational office. It is often helpful to provide regular email or newsletter updates so that donors can receive ongoing information about how their contributions made a difference through the organization’s work. Many organizations also choose to include in the acknowledgement an easy way for donors to indicate that they do not wish their names or contact information to be shared outside the organization and how they can “opt out” of receiving communications from the organization going forward.
Acknowledgements of other gifts of property and other non-cash contributions should include a description, but not the value, of the item or items contributed. Specific rules apply to the deductions taxpayers are permitted to claim for various types of non-cash gifts, such as donations of motor vehicles, appreciated art, or non-publicly held stock. Organizations that accept such gifts should consult with qualified legal and accounting professionals regarding their obligations. They are also advised to alert donors to the IRS rules for substantiating such claims and encourage them to seek appropriate tax or legal counsel when making significant non-cash contributions.