FundSvcs Community

It's always harder to hunt this up than I expect, but there are specific provisions about benefits provided to employees or partners of organizations in return for charitable contributions.

Essentially, if the benefit provided to each employee or partner would be considered insubstantial under the low-cost items, 2% rule, or membership benefits exceptions, they can be disregarded entirely.  Otherwise, the benefits must be disclosed, but no value needs to be provided.

This is 26 CFR § 1.170A-13(f)(9):

(9) Goods or services provided to employees or partners of donors -

(i)    Certain goods or services disregarded. For purposes of section 170(f)(8), goods or services provided by a donee organization to employees of a donor, or to partners of a partnership that is a donor, in return for a payment to the organization may be disregarded to the extent that the goods or services provided to each employee or partner are the same as those described in paragraph (f)(8)(i) of this section.

(ii)   No good faith estimate required for other goods or services. If a taxpayer makes a contribution of $250 or more to a donee organization and, in return, the donee organization offers the taxpayer's employees or partners goods or services other than those described in paragraph (f)(9)(i) of this section, the contemporaneous written acknowledgment of the taxpayer's contribution is not required to include a good faith estimate of the value of such goods or services but must include a description of those goods or services.

(iii)  Example. The following example illustrates the rules of this paragraph (f)(9).

Example. Museum J is an organization described in section 170(c). For a payment of $40, J offers a package of basic membership benefits that includes free admission and a 10% discount on merchandise sold in J's gift shop. J's other membership categories are for supporters who contribute $100 or more. Corporation K makes a payment of $50,000 to J and, in return, J offers K's employees free admission for one year, a tee-shirt with J's logo that costs J $4.50, and a gift shop discount of 25% for one year. The free admission for K's employees is the same as the benefit made available to holders of the $40 membership and is otherwise described in paragraph (f)(8)(i)(B) of this section. The tee-shirt given to each of K's employees is described in paragraph (f)(8)(i)(A) of this section. Therefore, the contemporaneous written acknowledgment of K's payment is not required to include a description or good faith estimate of the value of the free admission or the tee-shirts. However, because the gift shop discount offered to K's employees is different than that offered to those who purchase the $40 membership, the discount is not described in paragraph (f)(8)(i) of this section. Therefore, the contemporaneous written acknowledgment of K's payment is required to include a description of the 25% discount offered to K's employees.

My US$0.02 worth; the usual disclaimers apply.

Good luck!

Alan

Alan S. Hejnal (he/him)

Data Quality Manager

It's always harder to hunt this up than I expect, but there are specific provisions about benefits provided to employees or partners of organizations in return for charitable contributions.

Essentially, if the benefit provided to each employee or partner would be considered insubstantial under the low-cost items, 2% rule, or membership benefits exceptions, they can be disregarded entirely.  Otherwise, the benefits must be disclosed, but no value needs to be provided.

This is 26 CFR § 1.170A-13(f)(9):

(9) Goods or services provided to employees or partners of donors -

(i)    Certain goods or services disregarded. For purposes of section 170(f)(8), goods or services provided by a donee organization to employees of a donor, or to partners of a partnership that is a donor, in return for a payment to the organization may be disregarded to the extent that the goods or services provided to each employee or partner are the same as those described in paragraph (f)(8)(i) of this section.

(ii)   No good faith estimate required for other goods or services. If a taxpayer makes a contribution of $250 or more to a donee organization and, in return, the donee organization offers the taxpayer's employees or partners goods or services other than those described in paragraph (f)(9)(i) of this section, the contemporaneous written acknowledgment of the taxpayer's contribution is not required to include a good faith estimate of the value of such goods or services but must include a description of those goods or services.

(iii)  Example. The following example illustrates the rules of this paragraph (f)(9).

Example. Museum J is an organization described in section 170(c). For a payment of $40, J offers a package of basic membership benefits that includes free admission and a 10% discount on merchandise sold in J's gift shop. J's other membership categories are for supporters who contribute $100 or more. Corporation K makes a payment of $50,000 to J and, in return, J offers K's employees free admission for one year, a tee-shirt with J's logo that costs J $4.50, and a gift shop discount of 25% for one year. The free admission for K's employees is the same as the benefit made available to holders of the $40 membership and is otherwise described in paragraph (f)(8)(i)(B) of this section. The tee-shirt given to each of K's employees is described in paragraph (f)(8)(i)(A) of this section. Therefore, the contemporaneous written acknowledgment of K's payment is not required to include a description or good faith estimate of the value of the free admission or the tee-shirts. However, because the gift shop discount offered to K's employees is different than that offered to those who purchase the $40 membership, the discount is not described in paragraph (f)(8)(i) of this section. Therefore, the contemporaneous written acknowledgment of K's payment is required to include a description of the 25% discount offered to K's employees.

My US$0.02 worth; the usual disclaimers apply.

Good luck!

Alan

Alan S. Hejnal (he/him)

Data Quality Manager

Yes, the examples are unhelpful, because, as I read them, on is based on the low-cost items exception, and the others on the membership benefits exception, and neither on the 2% insubstantial benefits exception, so there's no real consideration of how the 2% limit is applied.

I haven't been able to find anything that is illuminating in this regard, so you may need to consult counsel.  However, if you do decide that you need to include the benefit, it looks like you don't need to provide the overall value of the benefit.

My US$0.02 worth; the usual disclaimers apply.

Good luck!

Alan

Alan S. Hejnal (he/him)

Data Quality Manager

It's always harder to hunt this up than I expect, but there are specific provisions about benefits provided to employees or partners of organizations in return for charitable contributions.

Essentially, if the benefit provided to each employee or partner would be considered insubstantial under the low-cost items, 2% rule, or membership benefits exceptions, they can be disregarded entirely.  Otherwise, the benefits must be disclosed, but no value needs to be provided.

This is 26 CFR § 1.170A-13(f)(9):

(9) Goods or services provided to employees or partners of donors -

(i)    Certain goods or services disregarded. For purposes of section 170(f)(8), goods or services provided by a donee organization to employees of a donor, or to partners of a partnership that is a donor, in return for a payment to the organization may be disregarded to the extent that the goods or services provided to each employee or partner are the same as those described in paragraph (f)(8)(i) of this section.

(ii)   No good faith estimate required for other goods or services. If a taxpayer makes a contribution of $250 or more to a donee organization and, in return, the donee organization offers the taxpayer's employees or partners goods or services other than those described in paragraph (f)(9)(i) of this section, the contemporaneous written acknowledgment of the taxpayer's contribution is not required to include a good faith estimate of the value of such goods or services but must include a description of those goods or services.

(iii)  Example. The following example illustrates the rules of this paragraph (f)(9).

Example. Museum J is an organization described in section 170(c). For a payment of $40, J offers a package of basic membership benefits that includes free admission and a 10% discount on merchandise sold in J's gift shop. J's other membership categories are for supporters who contribute $100 or more. Corporation K makes a payment of $50,000 to J and, in return, J offers K's employees free admission for one year, a tee-shirt with J's logo that costs J $4.50, and a gift shop discount of 25% for one year. The free admission for K's employees is the same as the benefit made available to holders of the $40 membership and is otherwise described in paragraph (f)(8)(i)(B) of this section. The tee-shirt given to each of K's employees is described in paragraph (f)(8)(i)(A) of this section. Therefore, the contemporaneous written acknowledgment of K's payment is not required to include a description or good faith estimate of the value of the free admission or the tee-shirts. However, because the gift shop discount offered to K's employees is different than that offered to those who purchase the $40 membership, the discount is not described in paragraph (f)(8)(i) of this section. Therefore, the contemporaneous written acknowledgment of K's payment is required to include a description of the 25% discount offered to K's employees.

My US$0.02 worth; the usual disclaimers apply.

Good luck!

Alan

Alan S. Hejnal (he/him)

Data Quality Manager

Yes, the examples are unhelpful, because, as I read them, on is based on the low-cost items exception, and the others on the membership benefits exception, and neither on the 2% insubstantial benefits exception, so there's no real consideration of how the 2% limit is applied.

I haven't been able to find anything that is illuminating in this regard, so you may need to consult counsel.  However, if you do decide that you need to include the benefit, it looks like you don't need to provide the overall value of the benefit.

My US$0.02 worth; the usual disclaimers apply.

Good luck!

Alan

Alan S. Hejnal (he/him)

Data Quality Manager

It's always harder to hunt this up than I expect, but there are specific provisions about benefits provided to employees or partners of organizations in return for charitable contributions.

Essentially, if the benefit provided to each employee or partner would be considered insubstantial under the low-cost items, 2% rule, or membership benefits exceptions, they can be disregarded entirely.  Otherwise, the benefits must be disclosed, but no value needs to be provided.

This is 26 CFR § 1.170A-13(f)(9):

(9) Goods or services provided to employees or partners of donors -

(i)    Certain goods or services disregarded. For purposes of section 170(f)(8), goods or services provided by a donee organization to employees of a donor, or to partners of a partnership that is a donor, in return for a payment to the organization may be disregarded to the extent that the goods or services provided to each employee or partner are the same as those described in paragraph (f)(8)(i) of this section.

(ii)   No good faith estimate required for other goods or services. If a taxpayer makes a contribution of $250 or more to a donee organization and, in return, the donee organization offers the taxpayer's employees or partners goods or services other than those described in paragraph (f)(9)(i) of this section, the contemporaneous written acknowledgment of the taxpayer's contribution is not required to include a good faith estimate of the value of such goods or services but must include a description of those goods or services.

(iii)  Example. The following example illustrates the rules of this paragraph (f)(9).

Example. Museum J is an organization described in section 170(c). For a payment of $40, J offers a package of basic membership benefits that includes free admission and a 10% discount on merchandise sold in J's gift shop. J's other membership categories are for supporters who contribute $100 or more. Corporation K makes a payment of $50,000 to J and, in return, J offers K's employees free admission for one year, a tee-shirt with J's logo that costs J $4.50, and a gift shop discount of 25% for one year. The free admission for K's employees is the same as the benefit made available to holders of the $40 membership and is otherwise described in paragraph (f)(8)(i)(B) of this section. The tee-shirt given to each of K's employees is described in paragraph (f)(8)(i)(A) of this section. Therefore, the contemporaneous written acknowledgment of K's payment is not required to include a description or good faith estimate of the value of the free admission or the tee-shirts. However, because the gift shop discount offered to K's employees is different than that offered to those who purchase the $40 membership, the discount is not described in paragraph (f)(8)(i) of this section. Therefore, the contemporaneous written acknowledgment of K's payment is required to include a description of the 25% discount offered to K's employees.

My US$0.02 worth; the usual disclaimers apply.

Good luck!

Alan

Alan S. Hejnal (he/him)

Data Quality Manager

Yes, the examples are unhelpful, because, as I read them, on is based on the low-cost items exception, and the others on the membership benefits exception, and neither on the 2% insubstantial benefits exception, so there's no real consideration of how the 2% limit is applied.

I haven't been able to find anything that is illuminating in this regard, so you may need to consult counsel.  However, if you do decide that you need to include the benefit, it looks like you don't need to provide the overall value of the benefit.

My US$0.02 worth; the usual disclaimers apply.

Good luck!

Alan

Alan S. Hejnal (he/him)

Data Quality Manager

It's always harder to hunt this up than I expect, but there are specific provisions about benefits provided to employees or partners of organizations in return for charitable contributions.

Essentially, if the benefit provided to each employee or partner would be considered insubstantial under the low-cost items, 2% rule, or membership benefits exceptions, they can be disregarded entirely.  Otherwise, the benefits must be disclosed, but no value needs to be provided.

This is 26 CFR § 1.170A-13(f)(9):

(9) Goods or services provided to employees or partners of donors -

(i)    Certain goods or services disregarded. For purposes of section 170(f)(8), goods or services provided by a donee organization to employees of a donor, or to partners of a partnership that is a donor, in return for a payment to the organization may be disregarded to the extent that the goods or services provided to each employee or partner are the same as those described in paragraph (f)(8)(i) of this section.

(ii)   No good faith estimate required for other goods or services. If a taxpayer makes a contribution of $250 or more to a donee organization and, in return, the donee organization offers the taxpayer's employees or partners goods or services other than those described in paragraph (f)(9)(i) of this section, the contemporaneous written acknowledgment of the taxpayer's contribution is not required to include a good faith estimate of the value of such goods or services but must include a description of those goods or services.

(iii)  Example. The following example illustrates the rules of this paragraph (f)(9).

Example. Museum J is an organization described in section 170(c). For a payment of $40, J offers a package of basic membership benefits that includes free admission and a 10% discount on merchandise sold in J's gift shop. J's other membership categories are for supporters who contribute $100 or more. Corporation K makes a payment of $50,000 to J and, in return, J offers K's employees free admission for one year, a tee-shirt with J's logo that costs J $4.50, and a gift shop discount of 25% for one year. The free admission for K's employees is the same as the benefit made available to holders of the $40 membership and is otherwise described in paragraph (f)(8)(i)(B) of this section. The tee-shirt given to each of K's employees is described in paragraph (f)(8)(i)(A) of this section. Therefore, the contemporaneous written acknowledgment of K's payment is not required to include a description or good faith estimate of the value of the free admission or the tee-shirts. However, because the gift shop discount offered to K's employees is different than that offered to those who purchase the $40 membership, the discount is not described in paragraph (f)(8)(i) of this section. Therefore, the contemporaneous written acknowledgment of K's payment is required to include a description of the 25% discount offered to K's employees.

My US$0.02 worth; the usual disclaimers apply.

Good luck!

Alan

Alan S. Hejnal (he/him)

Data Quality Manager

It is fraught.

The tax code doesn't really provide much guidance for applying the 2% insubstantial benefit safe harbor in this case, for charitable contributions where the benefits are made available to the donor organization's partners or employees.

The tax code does say that the donee doesn't need to provide a value for the benefit when acknowledging the gift, even if it doesn't fall under the de minimis exceptions, so that handles receipting.  Maybe there is guidance to the donor corporation about how they have to adjust the deductibility of their gift on their taxes, but, if so, I haven't seen it.

Since we (CASE) have hitched our counting to deductibility, it's not really clear whether we have to value the benefit for our own internal recording and gift counting, even if we don't have to provide an FMV to the donor.  There are some cases where we have to determine the value for something that we don't share with the donor, like the value of a gift of property.  In this case, would we follow the same principle as we do for gifts to individuals, where we do need to report the FMV, i.e. calculate the value of everything to which employees are entitled, regardless of whether the employees exercise those benefits?

As John says, there is the management issue at the most basic level.  How do employees get their tickets?  Are we making sure that an individual employee is only receiving their allowed number of tickets?  How many tickets did we give out?  What was the cost to the organization of providing those benefits, and did this initiative benefit the institution financially, apart from whatever good will might have been generated?  And there is the counting question, whether that information about the number and value of the more-than-insubstantial benefits affect how we record the income and report the gift, if we don't base that on what the employees were entitled to exercise??

I can see why some organizations might think twice about such an initiative.  And, in my admittedly limited number of institutions, I haven't had seen this sort of program myself.

This reflection does suggest to me that complexity is reduced (somewhat) if benefits fall under the membership benefit exception or low-cost logo articles exception, where the value of the benefits can be ignored, and complexity is reduced if we can minimize management overhead (is giving a t-shirt easier to manage than giving tickets to different events?  Maybe, if you give it to the donor company and let them distribute the item!).

Sorry that I don't have more useful information to offer.

My US$0.02 worth; the usual disclaimers apply.

Good luck!

Alan

Alan S. Hejnal (he/him)

Data Quality Manager

Yes, the examples are unhelpful, because, as I read them, on is based on the low-cost items exception, and the others on the membership benefits exception, and neither on the 2% insubstantial benefits exception, so there's no real consideration of how the 2% limit is applied.

I haven't been able to find anything that is illuminating in this regard, so you may need to consult counsel.  However, if you do decide that you need to include the benefit, it looks like you don't need to provide the overall value of the benefit.

My US$0.02 worth; the usual disclaimers apply.

Good luck!

Alan

Alan S. Hejnal (he/him)

Data Quality Manager

It's always harder to hunt this up than I expect, but there are specific provisions about benefits provided to employees or partners of organizations in return for charitable contributions.

Essentially, if the benefit provided to each employee or partner would be considered insubstantial under the low-cost items, 2% rule, or membership benefits exceptions, they can be disregarded entirely.  Otherwise, the benefits must be disclosed, but no value needs to be provided.

This is 26 CFR § 1.170A-13(f)(9):

(9) Goods or services provided to employees or partners of donors -

(i)    Certain goods or services disregarded. For purposes of section 170(f)(8), goods or services provided by a donee organization to employees of a donor, or to partners of a partnership that is a donor, in return for a payment to the organization may be disregarded to the extent that the goods or services provided to each employee or partner are the same as those described in paragraph (f)(8)(i) of this section.

(ii)   No good faith estimate required for other goods or services. If a taxpayer makes a contribution of $250 or more to a donee organization and, in return, the donee organization offers the taxpayer's employees or partners goods or services other than those described in paragraph (f)(9)(i) of this section, the contemporaneous written acknowledgment of the taxpayer's contribution is not required to include a good faith estimate of the value of such goods or services but must include a description of those goods or services.

(iii)  Example. The following example illustrates the rules of this paragraph (f)(9).

Example. Museum J is an organization described in section 170(c). For a payment of $40, J offers a package of basic membership benefits that includes free admission and a 10% discount on merchandise sold in J's gift shop. J's other membership categories are for supporters who contribute $100 or more. Corporation K makes a payment of $50,000 to J and, in return, J offers K's employees free admission for one year, a tee-shirt with J's logo that costs J $4.50, and a gift shop discount of 25% for one year. The free admission for K's employees is the same as the benefit made available to holders of the $40 membership and is otherwise described in paragraph (f)(8)(i)(B) of this section. The tee-shirt given to each of K's employees is described in paragraph (f)(8)(i)(A) of this section. Therefore, the contemporaneous written acknowledgment of K's payment is not required to include a description or good faith estimate of the value of the free admission or the tee-shirts. However, because the gift shop discount offered to K's employees is different than that offered to those who purchase the $40 membership, the discount is not described in paragraph (f)(8)(i) of this section. Therefore, the contemporaneous written acknowledgment of K's payment is required to include a description of the 25% discount offered to K's employees.

My US$0.02 worth; the usual disclaimers apply.

Good luck!

Alan

Alan S. Hejnal (he/him)

Data Quality Manager