As this tax year comes to a close, it’s time to review your plan for the tax receipts you’ll provide to donors for gifts made in 2021. These receipts are an important opportunity to strengthen the connection with major, mid-level, and sustaining donors by thanking them for a year of support.
Review the Rules
When preparing tax receipts, take a moment to review the IRS Guide for Charitable Contributions: Substantiation and Disclosure Requirements (Publication 1771, last updated 03/2016). Here’s what you should know:
Donors are responsible for maintaining a bank record or written communication for donations of less than $250 and a written acknowledgement from the donee for donations of $250 or more for which they intend to claim a deduction on their tax return.
Your station or organization is responsible for providing written disclosure to donors who receive goods or services in exchange for a single donation of $75 or more.
There is a “Token Exception” for “insubstantial goods or services” (such as a thank-you gift). To be deemed insubstantial, the Fair Market Value can not exceed the lesser of 2% of the payment or $112; or…
Meets the following criteria: The donation is at least $56.00, and the thank-you gift bears your station’s name and/or logo and is valued at no more than $11.20.
Your station is required to provide a written disclosure or receipt for donations of $75 or more that are partly for goods or services and partly for a donation. Your station must provide a good faith estimate of the fair market value of the item(s) (the IRS uses concert tickets as an example.) This is referred to as a “Quid Pro Quo” contribution.
To review these details, see IRS Memo RP-19-44- Page 18.
What Information Should You Include on a Tax Statement?
According to IRS Guide for Charitable Contributions: Substantiation and Disclosure Requirements, the IRS requires the following information:
- The name of organization
- The amount of cash contribution
- A description (but not the value) of non-cash contribution
- A statement that no goods or services were provided by the organization in return for the contribution, if that was the case; or a description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution.
Other details from the IRS:
- The IRS defines “good faith estimate” as follows: “An organization may use any reasonable method to estimate the fair market value (FMV) of goods or services it provided to a donor, as long as it applies the method in good faith. The organization may estimate the FMV of goods or services that generally are not commercially available by using the FMV of similar or comparable goods or services. Goods or services may be similar or comparable even if they do not have the unique qualities of the goods or services being valued.”
- A separate acknowledgment may be provided for each single contribution of $250 or more, or one acknowledgment, such as an annual summary, may be used to substantiate several single contributions of $250 or more.
- There are no IRS forms for the acknowledgment. Letters, postcards or computer-generated forms with the above information are acceptable. (Most stations now send statements electronically or as a mailed letter. We do not recommend postcards).
- An organization can provide either a paper copy of the acknowledgment to the donor, or an organization can provide the acknowledgment electronically, such as via an email addressed to the donor.
And, of course, you should consult with your tax preparer or counsel before instituting these recommendations. It’s become more difficult to locate this information in IRS memos and briefs than in previous years.
To ask or not to ask? Do you solicit a gift with your tax statements?
Over time, more organizations are asking for donations as part of their tax statements, and finding success. We recommend testing the addition of an appeal/ask as part of your tax statements, like an upgrade request to sustaining members. If your organization doesn’t have many engagement touch-points throughout the year (think newsletters and other non-ask communications), you should consider using your tax statements primarily as a stewardship opportunity to connect with and thank donors for their support. It’s even better to include a separate note or letter with the statement outlining the value of the donor’s support and looking forward to their continued partnership with your station.
Greater Public has sample mail and email copy from stations around the country available for your reference.
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