Transcript The Basic Non-Cash Donation - United Way Conferences Site

Charitable Receipting
Do’s and Don’t for UW Chapters
Mike Sorrells, BDO USA
United Way Finance and HR Forum
October 2013
Your Presenter
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The BDO Institute for Nonprofit Excellence
• Check out our new nonprofit blog at
www.nonprofitblog.bdo.com
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Agenda
• The Basics of Charitable Acknowledgement
- I will use “receipting” and “acknowledgement” interchangeably in
this presentation
• Special Circumstances and Events
• Question and Answer
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The Basics of Charitable Gift Acknowledgement
• All contained in IRS Publication 1771 http://www.irs.gov/pub/irspdf/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
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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
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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
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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
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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
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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
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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)
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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.
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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
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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
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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
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Form 8283
For non-cash contributions
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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
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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!
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Form 990 Contribution Reporting
• Both cash and non-cash contributors get listed on Schedule B
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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)
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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
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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
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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.
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