I feel your pain. The structural issue I would try to clarify is who has the authority and the responsibility to set FMVs, and what policy is in place to define FMV methodology. The IRS offers a really wide berth here, asking for FMV valuation to be done in good faith, by any reasonable method. Perhaps there's an opportunity to set a simpler method, like some marginal percentage over your costs (for simple events), or the average of three comparable events, or maybe you hire a professional event planner who can provide a valuation for you for each event. Streamlining this aspect might help address some of the challenges you've described.
Thank you,
Isaac Shalev
Data Strategy Expert
Sage70, Inc.
(917) 859-0151
isaac@sage70.com
Schedule a 30-minute consultation now:
Original Message:
Sent: 3/18/2024 1:05:00 PM
From: Beth Halleck
Subject: RE: FMV Question Related to Event Ticket
Hi Isaac,
Thank you for this clarification. I am aware of the either/or for FMV on the marketing materials or the receipt. As the person who generates the receipts, I worry that the attendee might be "surprised" to learn about the FMV on the receipt, I've advocated for having the information on the marketing materials.
When I request the FMV from athletics, they often only give me the "cost" to them of the meal or the meal/golfing, rather than what someone off the street would pay for a similar meal/experience. They rarely include the value of the venue, entertainment, decor, etc. So either I have to push a process that walks them through how to fairly value the event, OR look for a way to frame these more like "bake sales" - they raise money but aren't really philanthropy.
Thanks,
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Beth Halleck
Winona State University Foundation
bhalleck@winona.edu
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Original Message:
Sent: 03-18-2024 10:50 AM
From: Isaac Shalev
Subject: FMV Question Related to Event Ticket
It would be simpler if those events were treated as non-deductible, for sure. But keep in mind that if you do a QPQ event, there is no requirement to disclose the deductible portion of the ticket at the point of sale or on the marketing materials. The IRS requires a disclosure statement
either with the solicitation
or with the receipt of the gift. However...
The IRS places the burden on the charity to provide this disclosure, but places a separate burden on the donor to show a donative intent at the time of purchase. If the donor buys a ticket to a QPQ event that has a $40 FMV, but the donor does not know that the ticket cost is greater than the FMV of the ticket, the IRS would view it as no different than any other purchase, and would stand on the presumption that the donor valued the ticket at $100, and thus there is no portion that was intended as a donation. That's why it's good for the solicitation to include language that can establish donative intent. You'll often see language like "contributions are tax-deductible to the extent permitted by law," which is of course a tautology. All payments are tax-deductible to the extent permitted by the law, but the extent may be no deduction at all. Or, as Mr Burns put it when responding to Lisa's demand to know whether he donated any percentage of his income to charity, "zero is a percent!" Nevertheless, the language is useful for establishing a donative intent by the donor, even absent specific knowledge of the FMV prior to purchase.
Thank you,
Isaac Shalev
Data Strategy Expert
Sage70, Inc.
(917) 859-0151
isaac@sage70.com
Schedule a 30-minute consultation now:
Original Message:
Sent: 3/18/2024 10:53:00 AM
From: Beth Halleck
Subject: RE: FMV Question Related to Event Ticket
Would the "proceeds to benefit" language apply to an event with ticket prices more than $75? Is there a maximum amount that could be charged and still considered "proceeds to benefit"?
We often encounter this situation with our athletic department/teams holding golf tournaments. Their most recent event states "All funds raised to to student-athlete scholarships." I'm not certain if "funds raised" is close enough to "proceeds to benefit" to qualify.
We go round and round with our athletic department trying to get them to provide an accurate FMV for an event, and often get it well after they are already selling tickets, and without stating anything on their advertising.
It would be much simpler for everyone if they could use the standard language of "proceeds to benefit". I realize that without specifying the FMV and donation portion, we lose counting them as donors. I'd like to think it is okay for us to record the transaction on an individual's constituent record, since it shows their engagement with our organization?
Thanks.
Beth
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Beth Halleck
Winona State University Foundation
bhalleck@winona.edu
Original Message:
Sent: 02-08-2022 01:50 PM
From: John Taylor
Subject: FMV Question Related to Event Ticket
You are hearing correctly.
BTW, the only time a QPQ receipt is required is when you have promised a charitable donation and the total payment is $75+. Below this amount, no receipt is ever required.
John
John H. Taylor
Principal
John H. Taylor Consulting, LLC
2604 Sevier St.
Durham, NC 27705
919.816.5903 (cell/text)
Serving the Advancement Community Since 1987
Original Message:
Sent: 2/8/2022 2:36:00 PM
From: Kathryn Rusak
Subject: RE: FMV Question Related to Event Ticket
Thank you. The College has ALWAYS gone to the trouble of acknowledging the charitable portion ($38) of the $50 ticket because they were under the impression that they HAD to, that it was required to provide a charitable tax receipt for that $38 because the purchaser WAS getting SOMETHING (the $12 worth of meager buffet appetizers). I think I'm hearing from the two responses thus far, that this is not necessary. That the College could choose to consider all of the $50 ticket as straight revenue. I will connect with our accounting department as this relates to UBIT.
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Kathryn Rusak
Director Advancement Operations
College for Creative Studies
Original Message:
Sent: 02-08-2022 01:11 PM
From: Isaac Shalev
Subject: FMV Question Related to Event Ticket
You don't have to treat these as charitable contributions at all, but that does mean that they are profitable. You'll want to clear any UBIT concerns, though in your specific case I don't see a problem.
Thank you,
Isaac Shalev
Data Strategy Expert
Sage70, Inc.
(917) 859-0151
isaac@sage70.comSchedule a 30-minute consultation now:
Original Message:
Sent: 2/8/2022 1:21:00 PM
From: Kathryn Rusak
Subject: FMV Question Related to Event Ticket
We host a two week art exhibition that is free and open to the public. Except for 'opening night'. That night, sponsorships are secured, and individual tickets are sold (at differing levels depending on status: General Ticket = $50, reduced Alumni Ticket = $30).
General and alumni ticket holders have access to a small spread of appetizers and beverages. The college has historically calculated the value of that to equal $12, and thus the tickets have been processed through our RE NXT system, due to the charitable portion of $38 (when looking at a $50 ticket).
Other than dropping the General Ticket price to the estimated fair market value of the food and beverage available per person ($12), and cutting the Alumni Ticket to less than that (and the institution taking a small on alumni tickets), is there a way to sell these two types of tickets WITHOUT having to process them through our fundraising database, without having to issue charitable contribution acknowledgements?
Is an entrance fee ever just an entrance fee without a charitable portion? Could the institution charge $50 per ticket and just call it revenue without issuing charitable contribution letters?
Our goal is to potentially alter the ticket pricing structure / understanding so as to not have these ticket transactions end up in our database. By and large the ticket purchasers are not prospects.
Thank you,
Katie
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Kathryn Rusak
Director Advancement Operations
College for Creative Studies
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