Probably the place to start is that there are two sets of requirements (or three if you count the record-keeping requirement for cash gifts from the Pension Protection Act of 2006).
The requirement that we think about most is the Written Acknowledgment (Substantiation) requirement. That requirement says that, if a donor is claiming a tax deduction of more than $250 for a charitable contribution, the donor must have a written acknowledgment from the charitable recipient that meets certain standards: an identification of what was given (the amount of a cash gift or a description of a non-cash gift) and either a description and good-faith estimate of the fair market value of anything that the donor received in return or a statement that the donor did not receive anything of substantial value in return. That requirement came about because Congress was concerned that people were deducting charitable contributions using checks written to the charity when really those checks were from something different (tuition payments, rental of a facility, etc.). So a requirement was added to the tax code that if you want to deduct more than $250 you need something from the charity that substantiates what you gave and that it was a gift and what, if anything, you received in return. Because Congress was concerned about the behavior of the taxpayer, the requirement was placed on the donor to obtain the acknowledgment, not on us to provide it, but of course the donor has to receive it from us, and best practice is to just go ahead and provide it.
The other requirement, promulgated at the same time, is the Written Disclosure requirement. That requirement says that if a charity is soliciting payments of more than $75 partly as a contribution and partly in return for goods or services of some sort. This requirement came about because Congress was concerned that tax-exempt organizations were conducting fundraising that described contributions as tax-deductible but not disclosing to donors that the contributions were only partly tax-deductible. Because Congress was concerned about the behavior of the tax-exempt organizations, the requirement is placed on the organization conducting the fundraising. When we conduct this sort of fundraising, we are required to disclose that only the potion of the contribution that exceeds the value of the goods or services that the donor receives in return for the contribution, and to provide a good-faith estimate of the value of those goods or services. This disclosure can be made in the solicitation or when receipting the gift (in which case the receipt can meet both requirements). The best practice is to make the disclosure both in the solicitation and on a receipt.
So, if you solicit/receive contributions of more than $75 that are partly deductible and partly a quid pro quo, you are required to disclose to the donor that only the potion of the contribution that exceeds the value of the goods or services that the donor receives in return for the contribution, and to provide a good-faith estimate of the value of those goods or services, either as part of the solicitation or as a receipt. So, technically, you’re not required to provide a receipt, if you’ve made the disclosure as part of the solicitation (and, as an aside, we are also required by federal law to keep records of materials that we use in solicitations for a variety of reasons, so we would be able to document that we made the disclosure). If the total value of the transaction is $75 or less, we’re not required to make that disclosure.
The “regardless of how things were presented to the sponsor, what the sponsor believes, etc.” part is interesting. If the donor actually does receive anything of value, the disclosure must be made, regardless of what the donor was told, believes, etc.—that’s why the requirement exists! But it may also be the case that, if donors expect to receive a benefit or are entitled to receive a benefit, the deduction may be limited regardless of whether they actually receive a benefit (for example, if you have provided a benefit in similar circumstances in the past, if a donor is entitled to attend a dinner etc. regardless of whether they actually attend, etc.).
My US$0.02 worth; the usual disclaimers apply.
Good luck!
Alan
Alan S. Hejnal
Data Quality Manager
Smithsonian Institution - Office of Advancement
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From: Advancement Services Discussion List <
FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of Sean Shappell
Sent: Friday, March 8, 2019 10:54 AM
To:
FUNDSVCS@LISTSERV.FUNDSVCS.ORG
Subject: [FUNDSVCS] Sponsorship Minimum Acknowlegement/Disclosure Requirements
As of late, a lot of department and student run events for which the departments/students are seeking sponsorships have come out of the woodwork. Unfortunately, we don't find out about many of these until very late in the process, or, in some cases, after the fact. As you can imagine we’ve dealt with a wide swath of understanding on the rules around sponsorship on both the department’s/student's part, and the sponsor's part. I realize that what needs to be done for a long term fix is education and developing enforceable policies, but right now I’m trying to get through a number of situations in the immediate future.
I understand that best practice is to receipt all contributions that qualify as charitable, including FMV language as applicable, and I believe I have a pretty good grasp of what makes a sponsorship charitable or not (recognition vs. advertising, etc…). What I want to make sure I understand correctly is the minimum we're legally required to do by law.
Based on IRS 1771, if nothing is received in exchange for the sponsorship it seems that we are not technically required to receipt the donor. Under the "Written Acknowledgment" section it states:
An organization that does not acknowledge a contribution incurs no penalty; but, without a written acknowledgment, the donor cannot claim the tax deduction.
Sponsorships where goods/services are received seem a bit stickier. IRS 1771 states (emphasis mine):
An organization must provide a written disclosure statement to a donor who makes a payment exceeding $75 partly as a contribution and partly for goods and services provided by the organization.
...and...
An organization must furnish a disclosure statement in connection with either the solicitation or the receipt of the quid pro quo contribution. The statement must be in writing and must be made in a manner that is likely to come to the attention of the donor.
...and...
A penalty is imposed on charities that do not meet the written disclosure requirement.
So, it seems we are legally required to receipt and provide disclosure for any $75+ transaction that exceeds the FMV of the goods and services being received. I realize that we can also do this in a disclosure statement on the solicitation, but, as I said above, we often find out about these sponsorships well after the solicitation has been made.
Am I thinking about this right? Basically, For any monies ($75+) received by our organization that exceed the FMV of the goods/services received in return, we are required to consider that excess charitable regardless of how things were presented to the sponsor, what the sponsor believes, etc…
We’ve had many departments, student groups, and sponsors claim that since they were not positioning/considering the sponsorship as charitable, it is not. I've even heard this from legal counsel at major US corporations.
As always thanks for any input.
- Sean
Sean Shappell
Sr. Director, Information Services
Lehigh University Development & Alumni Relations
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