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Charitable Contributions Substantiation Requirements

by SST Partner, Becky DaVee

Public charities are maintained by a broad base of support and most of these organizations file an annual information return providing important data about their charitable contributions. Support comes in all shapes and sizes and may include “strings” or “earmarks” on how the funds can be used.  Your gift acceptance policy should outline the types of contributions that will be accepted and what the organization does with unusual donations.  A gift acceptance policy is one of the “best practices” outlined by the IRS in Form 990.

Donors must properly substantiate charitable contributions when claiming deductions on Form 1040. It’s best to maintain proper records to support these deductions and if your cash donation exceeds $250 then a contemporaneous, written acknowledgement from the nonprofit should be retained by the donor. The written donor acknowledgement should include the following information, click here to see our Donor Letter Checklist:

  1. Name of charity
  2. Date and amount of gift
  3. Description of non-cash donations (exclude value)
  4. Disclaimer that “no goods or services were provided by the organization in return for the contribution”
  5. Disclaimer that “goods or services provided by the organizations consisted entirely of intangible religious benefits”

If a donor makes a contribution in exchange for goods or services provided by the organization then this gift is considered a quid pro quo contribution. The organization is required to communicate the value of the goods and services provided in exchange for a donation before the amounts are given by the donor. The donor receives a charitable deduction when the amount paid exceeds the fair value of the goods and services received from the organization. The organization must provide a written statement for payments exceeding $75 partly as a contribution and partly for goods and services provided to a donor.

For more information about charitable contributions – please see the IRS Publication 526. If you need help in properly documenting your organization’s donations or assistance in recording these types of contributions in your financial statements please call me.