When you receive gifts of products, time and services, be aware that your organization can be held in even greater regard by donors of such In-Kind gifts, should you express your gratitude in a meaningful way—in a manner far and above how these contributions are usually acknowledged by non-profit organizations. This can be accomplished in strict keeping with the applicable IRS rules and regulations, which are especially explicit when it comes to In-Kind gifts and how non-profits handle them.
By law, non-profit organizations cannot provide a donor with the dollar value of an In-kind gift. Such valuations when applicable, relative to “fair market value” of In-Kind gifts, need to be professionally assessed and certified elsewhere—if they can be—and that is the responsibility of the donor. This certification subsequently needs to be resolved with the professionals and others who prepare the donor’s tax forms—whose work in turn will need to be reconciled with IRS regulations. In instances where time and service are donated, no tax break whatsoever is allowed, as the IRS Publication 526 clearly states, “You cannot deduct the value of your time or services…”
This unique aspect of In-Kind gifts often causes a non-profit organization to acknowledge them in understated, and almost offhanded ways, unlike the precisely stated amounts cited for gifts of cash and stocks. As well, the dollar value of gifts of cash and stocks can be directly related to specific programs and services made possible by such support, which is not usually the case with In-Kind gifts. Thus, appreciation of In-Kind gifts is not always expressed as effectively and graphically, but it can and should be.
A non-profit organization can acknowledge In-Kind gifts with descriptions of their practical value to the organization, and make some reference to their worth in dollars—what they might have had to pay “retail.” Most non-profit organizations could treat their In-Kind gifts in somewhat the following way:
Sample Acknowledgment for an In-Kind Gift
“Thank you for your generous gift of ________(Full Description)________ which we received on ____(Date)____. Your generous contribution will help to further the important work of our organization.
(Note: The benefit to the organization of the In-Kind contribution may be expressed in exact terms of its direct application to the organization’s operation, or it may be more appropriate that an indirect reference be made when the In-Kind gift’s application is not as sharply defined.)
While, according to IRS regulations, you will not be allowed to declare the value of your donation from our acknowledgment, we can say that, but for your generosity, we likely would have had to expend approximately $________ for what you gave as an In-Kind contribution. These are dollars saved which we are able to apply directly to support the programs and services we provide for the well-being of those whom we serve in our community.”
Recognition: Same as Cash
In addition, appreciation of in-kind contributions can always be publicly recognized by non-profits in their annual reports and other publications, with the donors’ names listed under the respective gift category amount related to the “retail value” of products, time or services donated. As stated previously, those figures would not be IRS-deductible amounts, and are not certified as such. But the public gestures by non-profit organizations regarding the “market worth” of In-Kind gifts are always greatly appreciated by the donors.
There can be little doubt that your In-Kind donors would be quite pleased to see their names listed in a contribution category of that “retail cost” right up there with the givers of cash. This public listing has been practiced for many years, with those contributing cash finding no fault when In-Kind donors are placed in the same category with them. And more importantly, donors of In-Kind gifts frequently express their gratitude for being recognized in such an appropriate and thoughtful manner.
Don’t Be Unkind to In-Kind
To reinforce the idea that it is a well-served practice to recognize In-Kind gifts in the way suggested, and that by not doing so could disappoint or alienate the donors of such gifts, I am reminded of two incidents.
Recognize What it Would Have Cost You “Retail”
Recognition of an In-Kind gift became a serious issue with a non-profit client of mine following the conclusion of a successful capital campaign. The new building was up and operating. Everyone—board, staff and the community—was satisfied and happy. The trouble came as the listing was being finalized for permanent and public recognition of the capital campaign donors on a bronze recognition plaque for the lobby, in preparation for the new building’s dedication event. Names were placed in columns under the specific and respective contribution levels. Those of us who were involved in various leadership roles for the campaign together reviewed, edited, and then approved the final rendering of the listing before it was to go to the plaque manufacturer. Then, two of the organization’s leading board members abruptly demanded the removal of the name of a major In-Kind donor from the $15,000 to $19,999 category, and demanded that the donor’s name be repositioned in the $1,000 to $4,999 category.
The In-Kind donor was a paint manufacturer. The original campaign expense budget for the paint (prepared well before its donation) reflected a best price to be paid in the market in the amount of $15,000 for the gallons required to paint all of the rooms in the new, several story building. The two shortsighted trustees adamantly insisted that, from experience with their own businesses’ manufacturing costs, the true expense to the paint company would only be approximately one-third of the retail price, and that was the gift category in which the paint contribution should be recognized. I went tooth and nail on this, and I finally won over the two truculent board members when they realized that, had not the paint been donated (no matter the cost to the paint manufacturer), the non-profit would have had to raise additional cash in the amount of $15,000 to pay for the paint.
Sometimes, being stubbornly practical and literal can do damage to the relations a non-profit has with generous benefactors. Imagine the officials of the paint company attending the dedication event of the building they supported, only to see their company’s name placed in a category not in keeping with the worth of the paint as they knew it—but greatly diminished in value as seen by the officials of the non-profit organization.
In-Kind vs. “Real Money”
I was going into the last month of a fund-raising consulting contract for a capital campaign with a social service organization. All had gone extremely well over our ten-month partnership. The organization’s volunteer leadership and staff did an outstanding job, the money was raised for the new building, and I felt that the last month of my contract required greatly reduced counsel on my part. Even if no counsel was necessary, the contract required that I be paid. In any event, I told them not pay me for the last month. As I saw it, I “donated” $3,000 to the organization. Naturally, I did not attempt to declare that “value” for a tax deduction. But, when the celebrations were over and the new building was dedicated, I, with some anticipation, looked for my name to be listed in the campaign publication under the “$1,000 to $5,000″ category, or included with their listing of In-Kind gifts. My In-Kind contribution was not acknowledged in any way. I asked the Director of Development about what I thought to be an oversight. The answer was quick and curt — “We appreciate what you did, but it was not “real’ money.” I saved them $3,000 from their capital expense budget, and the money was not “real?”
Never Take In-Kind Gifts For Granted
The final message here is that you must regard all types of “In-Kind” gifts with the care and consideration they deserve. It’s so easy, and so appropriate to acknowledge “real” cash and securities properly. But all too often when it comes to In-Kind gifts, it’s another kettle of fish. It should not be.
These are my views regarding the acknowledgment and recognition of In-Kind gifts. I welcome your comments.
Carol: Sorry for the delay. We had a glitch for a short time with our auto-notice e-mail process to let me know of postings.
You should only cite the number of books donated. You cannot/should not provide a specific amount of value. It is up to the donor to justify/convince the IRS of any allowed tax-deductibility—not your organization. If a bunch of disparate books, it is even going to be hard for you to give "paper credit" in your annual report and such. I guess even there, you may only want to cite the generous donation of ___quantity____ books from the donor.
Amy: Just as suggested in my article—that the donor “saved” you from paying that amount. You cannot give official notification of value for tax purposes. That is why the donor family themselves obtained the appraisal. They need to justify that declaration to the IRS, not your organization.
Aina: Yes, absolutely place the donor in that range in that case. i have always thought it a good practice, one well received by donors, to total their tax-deductible donations combined with "paper credit" when possible and reasonable for in-kind donations, and for what they gave over the fair "market value" of items purchased at auctions. Remember, the comingled amount is one you determine for simple public (non-IRS) recognition for such generosity.
Under the various levels of donations made to the organization for the Fiscal Year in the Annual Report, for example, you place those donors at the appropriate levels commensurate with their totals as cited above.
The heading overall can simply state that the contributions come from all sources for that FY, including Annual Fund, Memorial gifts, Gifts in Kind, tax-deductible portions of special event tickets, etc. Even cash payments made to outstanding capital and endowment campaigns,
Something like that takes in all sources. No need to separate them. Our folks loved it.
Items donated to a silent auction are "valued" for the auction and sold from a minimum bid. how are the acknowledgements worded if we were to give a dollar amount and how are they treated as in kind on the chart of accounts?
thanks,
karen
Karen: Continue to use the suggestions in the article about how and when to word what in-kind donation value you could state, as for example:
– saving us from spending $ ____. (this could be literally true for having an in-kind for what you would have paid for anyway, or if not, that the generous in-kind allowed us to have what we could not have otherwise been in position to purchase.)
– our patrons will certainly enjoy use of the $ ____ gift certificate. (that way, you are not saying what it is worth. A $50 dinner gift certificate off the menu price, could very well have the dinner actually cost the restaurant say, $20, so you get the idea why you cannot certify any actual value.)
– your exquisite and “priceless” painting brought forth a donation to our auction of $1,000.
Just do not word anything which appears to certify a value which you cannot do anyway.
How you handle with accounting is up to your finance director and the outside auditor. Organizations handle such things in different ways. I think it best to show no actual value of the items, because for many, it is not at all possible. The bid money is made part of the income for the evening, along with bar and dinner profit, to have a bottom-line net proceeds figure.
How do you acknowledge proceeds from a sale that are sent directly to your organization and include the donor's name/info?
Thanks for the great article!
TG
Tonya,
This sounds to me as being a third party seller of something they sold for the owner of the item or items with your organization being the beneficiary.
If so, and since the owner of the sold items had the proceeds directed to your organization, I think it appropriate for you to send on your acknowledgment and thanks to that person in exacting terms of the cash received. While he may have sold "in-kind" items, cash to you was the result and you should state that amount.
If the middleman seller did anything as the broker bordering on something charitable as well, then a separate appreciation note there may as well be a nice touch.
If off the target from what you wanted, please clarify.
How do you acknowledge donations when theree is an actual cash value? For example, a volunteer for a non-profit drives several hundred miles, spends the night in a hotel, etc. on behalf of the non-profit. They do not seek reimbursement for their gas, hotel room, etc., but did send an "In-Kind Expense Report" with receipts for their actual costs of the gas, room, meals, items purchased for use by the non-profit. If you have an actual cash value with receipts for the expenses they are donating, do you supply a tax receipt for the exact expenses?
Cheryl: Do not provide a tax receipt for the exact expenses. It will do no good.
Have your volunteer see the simple explanation in the IRS Publication 526 for expense deductions they can and cannot take. Mostly, it's cannot.
http://www.irs.gov/publications/p526/index.html
Your organization should have no part in providing any acknowledgment which may look like it is an official value declaration. But, to give due credit, the "value" may be cited in your listing of donors in your Annual Report, and other such ways to pay homage for the significant in-kind donation the volunteer has given.
Just as I suggest in my article above. Use the example there.
I am on the board of a not-for-profit company. We have been receiving Gifts In Kind for longer than I have been on the board. Recently, the question has come up as to whether or not the value should show up on the company's financial statements. The main reason for the question now seems to be whether they should be included in the "value" of the company, as we are seeking out like-valued companies in doing comparisons for things such as salaries and expenses.
Jay: This is a matter for your finance director, and for your annual outside auditor. I am not skilled in accounting principles.
But, I will venture forth in those to-me rather uncharted waters enough to suggest to you a common sense, intuitive, reaction to having in-kind donations’ values show up on your organization’s financial statements in terms of dollars.
I would say absolutely not.
For one thing, many such in-kind items have values which are not fixed or even known. Retail, wholesale, cost-to-manufacture, written-off items, and a whole host of other ways you cannot be sure what values to affix to which in-kind donation.
Worse, is that as values of items in dollars are entered into your financials, they are not real dollars. For example, were you a foodbank, you could not declare as a financial asset a flat-load of canned peas having a commercial value of say, $2,000. You cannot spend canned peas.
Once you begin to add such “values” which would inflate unrealistically your assets and bottom-line cash position, funders and other outsiders looking at your financials would see a much different and actually an erroneous picture of your true financial standing.
Anyway, that’s how I see it.
I am a TV news anchor and am frequently asked to MC events for charities. Am I able to deduct as an in kind donation my services as an MC and auctioneer for these events? The IRS rules seems to suggest no. But I have been told by another person in my position that this is permissible. Anyone know?
Mike: Sorry to report that you cannot obtain a tax-credit for your donation of your professional time and services. Great and generous of you to do so for worthy charities, but no In-Kind tax break is possible
Some expenses may be claimed, such as when the services you perform for a qualified organization require that you be away from home overnight. But, is seems not much else.
Details are clearly stated and can be easily found in the following document.
— IRS Publication 526
http://www.irs.gov/publications/p526/index.html
I am the Treasurer for my church and we have contracted with a website development company to revamp our site. They are charging us at a cost of $2,500 but indicate that the market value would be $12,500. They have asked for a "gift in kind" letter for the $10,000 of donated services. I need clarity as to whether we should issue this type of letter as the gift is basically for their hours of labor and as I understand it, labor is not a tax deductible donation however we are receiving something of value. Thank you for your time.
Cynthia: You are correct. Use the $10,000 in-kind contribution in an acknowledgment letter to only recognize the “value,” not as they see it internally, but as a value you only appreciate, especially since you did not need to incur such an expense in order to have a website development operation.
Take a look at the sample letter in my article above, and make the same statement of appreciation for what they saved you from spending—nothing more. Any tax-deduction for charitable purposes or as a business expense for the $10,000 in-kind donation, is absolutely something only the company can declare with their tax filing.
IRS Publication 526 makes that quite clear, in the event the company should refer to those rules for In-Kind donations.
I am with a domestic violence non-profit. A local moving and storage company offers our clients furniture left behind by its customers. We send people there 5-10 times a year. He promotes this service (donating unwanted furniture to charities) to his potential customers. The owner wants us to send an acknowledgement letter to his customers. The concern I have is that the customer's furniture may or may not end up with my organization. If we don't have a need for it, it just sits in the warehouse. Other local non-profits also utilize the donations. Is it wrong of me to send a letter to the customers?
Thanks for your advice.
Sherri: I do not want to see you risk what is something of great value to the needy and deserving people you serve. It is a generous and thoughtful act on the part of the moving and storage company owner.
However, you could tell the owner of the moving and storage company that your non-profit, under IRS rules, can only acknowledge what is in fact donated to your organization.
You would be happy to send letters to the former furniture owners specific to the number and types of items actually presented to your clients.
But, I am troubled by another point.
Though I am not an attorney, nor skilled in non-profit law, I think you need to carefully think over the fact that your organization is not the actual receiver of the donated goods, which you in turn would yourself distribute to your needy clients.
The fact that the clients themselves are the receivers, may take the practice out of the usual way the donors of the furniture may make a claim for tax-deduction. While this may seem to be a subtle point regarding handling, I think it worthwhile to check in with your attorney or accountant regarding that your organization is technically “out of the loop” as the true receiver of the donated items.
And for sure, in any event, you should not send in-kind donation acknowledgments to the donors of furniture which was not actually given to your organization’s clients.
I am with a non profit and we have a gala fundraiser once a year. If a performer normally charges $10,000 for a 1.5 hour show, but is willing to perform for $5,000, can a letter be sent acknowledging the value and actual amount paid? I know that labor is not deductible, but since we are getting something of value, I thought we might be able to acknowledge this in some way. Thank you for your assistance.
Shin: The performer cannot get a tax-deduction for the donation of services. That is clear in the IRS 526 Publication. And you cannot certify such actual value.
You will be paying $5,000 and that is a separate issue and transaction. There will be a contract and receipt for your payment of the $5,000.
But in your letter of acknowledgement, it is not necessary to refer to what you paid, as you can simply, and only, say something along the line of—that by her or his generosity, you understand that an in-kind donation was made to your organization of a significant reduction of $5,000 from the performance fee which saved your organization from spending that amount which instead will lead to an even greater Gala net proceeds amount to directly benefit the organization and its good works.
That should do it. That way you publicly recognize the in-kind donation, but you avoid declaring actual value the performer can claim, which would be in error.
See a similar sample letter in my article above these comments on the subject.
We are an LLC, and own a pumpkin farm. A Robotics Club is using our barn to build a robot. We want to give them the use of the facility as an in kind gift. How do we claim it on our taxes. What documentation is needed? We plan to use a fee times the number of days they have used our facility. Thank you. We want to handle this correctly.
Linda
Linda: This is something you must discuss with your attorney and/or accountant regarding your donation to the charity. My writing on in-kind donations deals only with how and when to acknowledge them from the standpoint of the receiving charity. Then, it is never to offer any official valuation, which would not be acceptable to the IRS anyway, but to only have the charity say "thank you" for saving them what they would have had to pay "retail."
But, from what I see, though not an attorney, the Robotics Club can only thank you, and not even cite a value they saved by use of the barn, since I assume the barn is not a usual source of rental income. I cannot see how there can be a valuation regarding what you may claim as a tax-deduction unless what you offer as a donation of rental income. Even then, you must always check this out with your financial advisors. Do so anyway, should there be some possible claim for relief if you spend more money than usual for heat and electricity. Tax advisors will tell you what you can and cannot do.
Fpr your information, the following IRS document is quite useful.
IRS Publication 526
http://www.irs.gov/publications/p526/index.html
Tony,
Great article provides clarity on the issue. I have a related question. I am with a non-profit community orchestra and we have commissioned a piece of music from a composer. The current thinking in the draft of the composer agreement is to structure the agreement such that the cost of the commission is $6000.00 with $3000 cash payment from the organisation to the composer and a $3000 in kind donation from the composer to the orchestra. Do you think that this is problematic? We do not plan to then subsequently provide any "in-kind acknowledgment letter".
Eron
We are a non-profit that frequently receives donations that we give away at fundraisers or community events. For example we were recently given a $25 gift card to a local grocery store. Am I able to give a tax deductible receipt for this?
Eron: We appreciate your approval of what we try to do here. Keep looking in, as we add new material on a regular basis.
I see two ways to go with the composer:
(1) You pay the composer the full commission fee of $6,000 and the composer in turn makes out a check to your orchestra in the amount of $3,000 as a tax-deductible donation. However, since the $6,000 would then need to be declared as income by the composer at tax filing time, the composer’s tax professional may determine this to not be in the best interest of the composer, perhaps taking her or him to a higher tax responsibility level. Nonetheless, maybe this idea could be mentioned.
(2) The composer cannot get a tax-deduction for the $3,000 amount of the composition fee he or she is giving in-kind of services. That is clear in the IRS 526 Publication. And you cannot certify such actual value.
You will be paying $3,000 and that is a separate issue and transaction. There will be a contract and receipt for your payment of the $3,000.
In your letter of acknowledgment, for the in-kind donation, it is not necessary to refer to what you paid, as you can simply, and only, say something along the line of: “That by (her or his) generosity, you understand that an in-kind donation was made to your orchestra of a significant reduction in the amount of $3,000 from the music composition fee which saved your orchestra from spending that amount which instead will lead to you having those funds to directly benefit the orchestra in other ways, and to continue its good works.” (Something like that.)
That should do it. That way you publicly recognize the in-kind donation, but you avoid declaring actual value the performer can claim, which would be in error.
See a similar sample letter in my article above these comments on the subject.
Jamie: I am not an attorney or an accountant, but I can tell you what I have come to understand to some degree. There is a great deal of literature and rulings from the IRS regarding gift cards, much of it still making some pronouncements unclear.
There are two ways to look at what you wrote, and each would have a different way of providing acknowledgment:
(1) If the gift card came directly from the grocery store, say for $50, it is clear that the actual in-kind donation by the grocer would not be in that full amount. The card would be applied to merchandise which would not be at the exact cost paid by the grocer to his vendors. So, you simply use a form of the letter sample I have provided above in my article.
(2) However, if an individual paid $50 for a gift card at the grocery, that $50 is indeed cash out of the pocket of the purchaser.
From what I see from the proposed, pending and current IRS regulations, the IRS appears to lump gifts made through gift cards in the same category as gifts of straight cash. My guess it that it would be appropriate to acknowledge a gift made with a gift card in the same manner as the organization acknowledges gifts made by cash, check, credit card, or on-line cash transfer.
As far as I can tell, these Regulations are still "proposed," but this appears to be the only guidance there is.
I suggest that you go into the IRS website and conduct some research. And good old Google should turn up plenty when you type in words such as—donations of gift cards.
I do fundraising house parties for my non-profit and individuals will supply food & beverage and party supplies for the event – am I able to write them an in-kind donation receipt for these types of goods?
thanks
Mario: Yes, you should give those donors an in-kind donation receipt, just as the term makes clear, be it for products, goods, and services, but not in any way giving an expression of the value they claim for the in-kind donations as you would with cash gifts.
Just adapt the sample letter in my above article to thank them for "… saving you from spending $ ____ with the beverages they donated, which will allow you to spend less for the fund-raising party, thus having those net proceeds funds directly available for your organization to carry out its mission doing its good work. Something like that would work.
How do you acknowledge items donated for a fundraising auction? More specifically do you give equal "credit" to both the person donating the item and also to the person that actually purchases the item at auction? NPO has a prominant donor recognition plaque and both the item donor and the item purchaser want their names on top billing. Your paint mfg example makes sense to give credit for the higher value, but I'm muddled w/ the tug-of-war between two donors for slot in the bronze section, when NPO only rec'd one bronze value…thoughts?
How do you acknowledge several boxes of baseball, boxing and footbball sports cards? Do I need to know the exact number of cards and each players names? How should I hanlde this donation?
Bee: First, a pair of very big “ifs.”
If, whatever those particular two individuals (in-kind donor and buyer) want/demand, can, with some certainty be an isolated issue, and have little chance for others to notice, to care, and to claim the same recognition—and especially if the buyer is, and would continue to be, a major donor—then you go ahead and do the listing.
But, in reality, you cannot give “equal credit” to an in-kind donor of an auction item and the “buyer” of an auction item. The former is giving up something for nothing, and the latter is ending up getting something, no matter it was from a successful bid.
The latter receives significant gain for his or her purchase/donation, and is being unreasonable and unrealistic to want to claim what money was given for what he or she received in value.
Aside from the caveats in my first paragraph, foregoing any risk of alienation, the purchaser/donor of the item should not get such credit, and her or his name most assuredly would not be posted publicly with other true donors.
The example I gave of the paint company was explicitly related to the donated paint being a direct monetary relief of the capital campaign budget of the new building for the non-profit. The same sensible and deserving consideration was given to in-kind donors of such things as beds, mattresses, counter tops, furniture, etc., all which were items budgeted to build and furnish the new Ronald McDonald House. Thus, those in-kind donations were truly credited publicly in every way for what they did indeed save the RMcD House from spending “retail.”
However, giving items for an auction is another matter. And certainly so when one buys an auction item.
No matter the item or cost to the donor of the auction item, such donations are not treated in the same way as regular donations of cash. They get public enough with their listing in the program of the evening and on the display table. The acknowledgments simply cite what you understand the value to be which in turn allowed you to receive a cash donation for someone wanting that item.
Such donors can, if you wish, be simply listed separately in an “In-Kind” donation category under various levels, but not to be emblazoned on a wall or cut into a plaque.
And the individual making the purchase/donation of say, $5,000 for a week’s stay at a condo in the Bahamas, cannot, should not, be given public credit for a $5,000 donation to your organization. The IRS would surely forbid it, and so should you, unless that donor has been a regular major giver and could continue to be. You may need to compromise somewhat in carrying out policy, but avoid doing so if you can.
Carla: The donor apparently did not think it important enough, or necessary, to himself provide an inventory of the cards donated to your organization. If that is so, that is strange, especially if there is meaningful value which only the donor can determine from an appraiser in the event a tax-deduction is possible. I would have thought he would have an exact count and type of card inventory. If he did give such details, you can acknowledge his inventory by simply stating that you "understand" that boxes contain (such and such).
Thus, for a prompt acknowledgment now, you can simply refer to the receipt of those boxes in the number of boxes, citing the large quantity of cards in the way you stated above. But, you should get to work to develop an exacting inventory, and you can say that you will be doing that in your letter of thanks.
The value in the “marketplace” to collectors of such memorabilia is something you cannot know at this time, unless the donor said so, and then you should only say thanks for the cards, which you “understand” have significant value, and through the donor’s generosity, you will leverage the value of those cards to help raise money for your organization.
Maybe sooner than later you will need to put those cards in various states of order, by quantity per sport, by athlete, era, etc., so you are in the best position to offer them in the ways you intend to raise money. At that point, you will have an exacting inventory which you can later include in a follow-up acknowledgment to the donor which is not intended at all to have the donor of the cards come away with a valuation from your organization. This is more of a courtesy exercise to show in detail the extent of his generous donation. All appraisals for such in-kind collectibles or memorabilia for tax-deduction purposes, is up to the donor.
It would be important for you to know the value in that collectors’ “marketplace” so you can offer the cards at appropriate donation levels.
You need to know, for example, if a Mickey Mantle rookie year card can be obtained from your organization for a donation to your organization for an amount at least equal, or better yet greater, to its value to collectors.
I have helped organizations receive from a company helping non profit s with over one hundred million a year in donated materials.So it may be easy to over look,but you need to file the IRS form 8283 with donations above 5,000 of in kind gifts.,please correct me if I am mistaken .Me SudahUmmahArt&Cultural Organization.
Fred: More than what often sounds like an offhand introduction to a number of replies of mine you see above, the “I am not an attorney, nor am I giving legal advice,” assertion is really not necessary since all of the comments to my above article have been from the point-of-view of what and how a receiving non-profit does when given in-kind donations. They never make, nor should they make, exacting evaluations of such gifts of services, products, or property.
But, your Comment comes from “across the table” regarding the donor of in-kind gifts. And that is a much different story to which you alluded correctly. This is truly where any such donor of in-kind donations to a non-profit organization must consult and comply with the explicit IRS rules when it comes to seeking a charitable deduction, especially when they make an evaluation of $500 or more value of such in-kind gifts. You cited a $5,000 amount, but correct me if I am wrong, but the number appears to be $500.
Just a few weeks ago, my wife and I were settling our 2011 tax return with our preparer, and we talked about a good deal of in-kind donations which we expect to give this year to a number of charitable organizations resulting from an intended sale of our home and the usual clearing out process of many unwanted or unusable items. It was then I heard for the first time about IRS Form 8283.
We were told, and I have since done a Google search accordingly and found that, whenever a deduction exceeding $500 is claimed for a non cash gift, the donor must file Form 8283, Non cash Charitable Contributions Form. While this may be news to some individuals giving in-kind donations at or above that amount, I would expect that most any business would have that requirement right at hand and follows it exactly.
It is good though, that you brought up the limit to where donors of in-kind must take heed of the Form 8283 requirement, as most whom we deal with here are individuals. An example of the form can be readily found with an Internet search. Proving the values, once one goes over the $500 limit requiring such filing, would no doubt be a formidable challenge because the IRS knows how easy it is for in-kind donations to often be over-evaluated. And again, the non-profit receivers cannot, and do not, provide any such meaningful and applicable evaluations.
Alumni Association. We are a nonprofit 501(c)3 entity. In June we are having a fundraiser event. For our silent and live auctions, we have received a few hotel resort gift packages as well as some bed and breakfast packages. My question is: Do I send a Gift in Kind form to these contributors? I have had conflicting answers from various departments. Please advise.
Sue: I think it to be helpful if only you suggest that an In-Kind (non-cash) donor refer to the appropriate IRS regulations for such a donation. That suggestion could follow your initial thank you statement with a description of what exactly was donated, and how the item, :which you understand has a commercial value of $ _________, will be used at your event to attract the highest possible bids in support of the work your organization does.”
Nothing more.
It’s tough enough for a non-profit to handle its own IRS reporting obligations, but it could be misleading, and even in error, to send any IRS official reporting form or document which you believe the donor must/could file. That is up to them.
And, if they do not have prior experience with how they internally handle In-Kind donations, they certainly have accountants and tax advisors who know what to do—presumably the more common reporting they must/can do with IRS Form 8283, something to which you may refer as the document you “understand” is one they may check out for its possible use.
But, I suggest that you do not yourself provide any such form. It’s best for them to know what to do according to their own resources, the possible intricacies of the donation, and to meet IRS expectations and regulations.
I do some accounting and donor accounting for a 501c3 that recently had an event video made. The company is charging us part of the cost and donating about $3000 of the cost. From reading your article, it seems I should state in the acknowledgement letter "Thank you for donating your video services…,we would likely have had to expend approx. another 3000$ for what you gave us as an in-kind contribution. I did not see any example addressed in your article. Thank you.
Michelle: Yes, it's up there, in the section, "Sample Acknowledment For An In-Kind Gift."
See the second example for the statement regarding the In-Kind gift which allows that much money in real terms to be spent on the mission.
Look above too, to my reply to Eron on March 8, and my reply of March 9. It's the same type of situation you described, that being you paid the company a portion, and the balance was donated as an In-Kind gift. Treat both transactions as I suggested, if you wish.
Our 501c3 organization administers an educational travel program. During our travel, a volunteer sponsored two youth’s travel expenses (hotel, airfare, excursions, & meals) using her own personal credit card and submitted us with an “In-Kind” Expense report along with the receipts.
(1) How do we acknowledge her in-kind donation?
(2a) Can we record the in-kind donation in QuickBooks to show on the donor report? (2b) If so, which chart of account should we use?
Any assistance would be greatly appreciated.