Contributions of more than $75 that give a benefit to the
donor are considered quid-pro-quo contributions. They are deductible only to
the extent the contribution exceeds the value of the benefit, and this must be
spelled out in writing. The benefit can be in the form of cash, property,
services, or privileges.
There are several exceptions for items of insubstantial
value.
Token Exception
The IRS offers three criteria, any of which can qualify a benefit for the “token” exception:
- Free, unordered items, such as labels or calendars, that cost less than $9.10 are considered insubstantial.
- If the contribution is at least $45.50, items that bear the organization’s name (i.e., calendars or
mugs) are insubstantial if they cost no more than $9.10. - If the value of the benefit to the donor does not exceed 2 percent of the donation or $91, whichever is less, it qualifies as insubstantial.
If the donor receives only benefits that qualify for the token exception, the organization may state that no goods or services were provided in exchange for the donation, and the entire donation is deductible.
Membership Benefit Exception.
Membership benefits are considered insubstantial if the
organization’s annual fee is $75 or less. These include free or discounted parking
and/or admission to events or facilities, discounts on purchases from the
organization’s gift shop, and attendance at member-only events.
Intangible Religious Benefit Exception.
Religious benefits provided by an organization operated exclusively
for religious purposes are not considered quid-pro-quo benefits. Benefits that do
not qualify for this exception include consumer goods, travel services, and
education leading to a recognized degree.
In acknowledging quid-pro-quo contributions of more than $75,
organizations must describe the goods or services given in return and include a
good-faith estimate of their value. If the services are entirely intangible
religious benefits, the letter should say so.
Penalties.
Charities that do not meet the written disclosure requirements for quid-pro-quo contributions are subject to a $10 penalty per contribution, up to $5,000 per fund raising event.
References:
- IRS Publication 1771, Charitable Contributions: Substantiation and Disclosure Requirements
