In-Kind Gifts: How to Acknowledge
and Recognize Them

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 to 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.

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183 responses to “In-Kind Gifts: How to Acknowledge
and Recognize Them”

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  1. Larry says:

    Tony,
    A friend of mine is considering donating a playground to a local park. The park does not have a non-profit organization associated with it. He wants to donate a 100% turnkey solution and wants to pay the contractor directly to avoid an RFP process. He has gotten preliminary approval from the city however he is concerned his donation will be considered “in-Kind” vs. cash. If he pays the contractor directly how do you suppose this transaction will look like for taxes?
    Thanks

    • Tony Poderis says:

      Larry,
      Though I am not an attorney, nor one skilled in non-profit law, I do have a few comments and opinions—meant to encourage you and your friend to seek exacting and accurate professional counsel.

      — Paying the contractor directly, to avoid the RFP process, could suggest that the contractor is so favored that no other bids are desired. How does that fit with the city’s policies on such matters? I would think it certain that contracts of that type are required to be put out to bids. As well, look to unfavorable perception regarding the favored contractor over any other.

      — If the city wants the playground, all involved should get a ruling that a donation to the city can be considered with the IRS for tax benefit. From what I understand, donations to a local government entity generally quality a donor for a tax-deduction on their federal tax return. Making a contribution to the city which works in that way would have the donor benefit, while the city turns around and uses those donated funds to pay the contractor.

      —If your friend pays the contractor directly, then there cannot be any tax relief or benefit to your friend. It is therefore not a tax-deductible contribution to an accredited charity or a governmental entity which may enjoy that classification.

      For a non-lawyer/IRS expert, that is how I see the situation you describe. But, far too much is at stake for you to rely only on only what I see from experience and from a common sense viewpoint.

      • Larry says:

        Tony,
        Thanks for the response. The contractor issue is simply that my friend is trying to get the project finished and in an economical manner. He just wants playground equipment at that location nothing more and without any red-tape. He suspects that if the city is involved the project will take forever and cost 3 times as much. This is in an economically disadvantaged area so this is about the only shot they have at getting anything. Regarding the contractor he shopped all the major playground equipment sellers and he simply feels this one is the best for the money nothing more. Why however would his paying the contractor not qualify for an “In-Kind” donation? At minimum he did buy the equipment and donated it? How would it be any different than donating any material object? Thanks in advance.

        • Tony Poderis says:

          Larry,
          Your friend’s intent is commendable, and you are being a good friend to help him fulfill his wish to do something good.

          However, working around the property owner—the city—seems to me to invite great risk. I doubt that City Hall personnel, responsible for purchases and letting out contracts, and the City Planner, will sit idly by and let the donor and contractor do as they think best for the City.

          Be that as it may, it appears to me that the most effective and tax-deduction route is not being considered—that of donating the funds to the City, which then uses the funds to pay the contractor.

          Why is that?

          Probably because then, considering usual governmental policy rules, at least three or so bids would need to be sought. That messes up the non-red tape way the donor sees the project going ahead.

          The way I see it—and you must get a true legal ruling—is that your friend, paying directly to the contractor (even if allowed in this way), is going to have the contractor required to declare that money as earned income on the company books.

          A commercial business of this type cannot be a pass-through for such “donated” funds.

          If your friend bought the equipment and donated said equipment to the City, then that is indeed an In-Kind donation.

          He simply cannot “donate” to a business.

          That is how I see it, and those issues must be taken up with your friend’s CPA and attorney.

          It probably would not hurt to talk over the issue with the City Attorney.

  2. Elaine says:

    We are working on our Annual Report and the question of listing in-kind donors (specifically auction donors) in the Honor Roll of Donors by giving level has come up. Ordinarily we list auction donors on their own page in the publication and in-kind donors are listed separately as well, but some feel these donors should be listed with the cash donors. I would like to know what the correct way to handle this is and what others are doing in this regard.
    Thank you,
    Elaine

    • Tony Poderis says:

      Elaine,
      I have always believed that we should apply to our donor listings and so recognize the total amount given in any fashion by all donors in a given fiscal year.

      Each year, our Annual Report’s Donor Recognition page listed all of the various dollar categories we felt were appropriate to the range of donations we received. Such a listing will naturally differ from one organization to another.

      Our practice—especially in the Annual Report donor listings—was always to add together all tax-deductible contributions and the value of In-Kind gifts made by the same donor in a fiscal year to what the donor gave to the Annual Fund. That total was placed in the appropriate gift category/level.

      The heading at the top of the donor listing made clear that the donors were being publicly recognized for their total support to our Orchestra for that given Fiscal Year, including Annual Fund donations, payments of capital and endowment pledges, sponsorship and underwriting payments, In-Kind donation amounts as best assessed by Fair Market Value, and the deductible portion of patron tickets they bought for special events. That way of combining all of the cash and other values in one contribution amount was received with appreciation by our donors. Many were pleasantly surprised.

      For example: Annual Fund gift was $2,500.  Tax-deductible portion of two patron tickets to the Gala totaled $150. Same donor paid $1,000 cash in this year toward a multiyear capital campaign pledge. For our Auction, they gave a flat screen TV market valued at $1000.

      Thus, the total given in cash/paid in cash/In-Kind value for the fiscal year, was $4,650 and that fit nicely into our $2,500 to $4,999 category listing on the donor page.

      Along the way I had a new Finance Manager who protested that we were giving credit to donors who “were not giving real money” in some of the applications. I convinced him that though a couple had a great time at our Gala, their patron ticket cost exceeded the expense of entertaining them, and that the net proceeds were indeed real money. And were to pay for the TV for the Auction to attract bids, we would have had to pay for it ourselves “retail.”

      I always felt that extending ourselves to give simple paper credit when it makes a donor feel good, is a thoughtful thing to do, and our donors, always appreciated the effort and our thoughtfulness.

      • Elaine says:

        Thank you for your reply!
        The other scenario we ran into last year was a guest at our auction wanted to see his name listed in our annual report because he said he sets aside a certain amount of money to spend at our auction (a generous amount) and he considers this money his donation for the year. (And since we exclude these purchases, his name did not appear in the report at all.) Some have argued that since he received items or services in return for his contribution, it can’t be included. Since our annual report is not audited and shouldn’t be used for tax purposes, it has come into question whether or not that is true.
        I would be interested in your view on this.
        Thanks!
        Elaine

        • Tony Poderis says:

          Elaine,
          To me, yours is far more a donor relations issue than anything to do with accounting.

          Telling a major purchaser of auction items that you cannot give him public credit for the full amount of what he paid for those products or services, can put at risk his future support.

          The IRS will not allow him to claim that full (if any) amount for a tax deduction, so why should he expect to have you recognize his purchase in that way?

          If you are forced to do it his way, then you open the door for others to follow suit. Even one such unreasonable and inappropriate listing is one too much.

          For example: The fellow enjoyed a condo in the Bahamas for ten days—worth $500 per day for his bid of $5,000, and wants you to give him public (Annual Fund listing) credit in that amount.

          That was his “donation,” that is true, but practically, morally, and ethically, he is wrong to expect such a listing because he was well compensated in the form of a tangible and valuable asset. He received genuine value and benefit for what should be an unfettered purchase, and not a charitable donation as we generally know it.

          The IRS law is clear, and your particular purchaser of auction items must come to grips with, on the one hand, to have a totally different declaration value for taxes (in the case above, none), and on the other, a $5,000 value for which he asks that you give him public credit.

          Donors who purchase items at a charity auction may claim a charitable contribution deduction for the excess of the purchase price paid for an item over its fair market value. The donor must be able to show, however, that he or she knew that the value of the item was less than the amount paid. if your donor pays more than the published value, the difference between the amount paid and the published value may constitute a charitable contribution deduction, and your listing in that amount. If less, no deduction, then no listing.

          It can get messy.

          Since he has had a history with you of making auction purchases annually, he would know the IRS ruling, to be sure. Thus, knowing the way the IRS sees such purchases, and what he wants from you in a counter fashion, suggests that you will face a serious decision which could put his future support at risk, or cause untold problems from other such purchasers of auction items seeking the same kind of unreasonable public credit.

          He should be made to understand how those purchases work with the IRS, and that his receiving of a benefit should have his common sense, and sense of what is fair, show through and not expect a public listing of the type he is seeking.

          A review of the following IRS webpage should be of interest to all:
          http://www.irs.gov/Charities-%26-Non-Profits/Charitable-Organizations/Charity-Auctions

  3. Pat says:

    Hi Tony:

    I want to include language in our annual report thanking our in-kind donors, which are many. I don’t want to thank them individually or by dollar amounts. Can you suggest an appropriate sentence or two to include?

    Thanks
    Pat

    • Tony Poderis says:

      Pat,
      Sorry, but somehow I missed your July 10 Blog posting. I just now saw it.

      You could consider saying something in this way

      “But for the generosity of our many donors of In-Kind products and services, we likely would have had to expend a considerable amount of money for what those donors gave as an In-Kind contributions. These are dollars actually 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.”

      Something in that manner, which gives a true sense of value, when all too often, In-Kind donations are not regarded in the same breath as when we refer to cash. I have heard some receivers of In-Kind gifts dismissing them as “not being real money.” Of course they are not, but such In-Kind gifts do indeed have real value.

      By the way, I can understand how it could be unworkable with so many In-Kind donors to list them, but you might want to consider paying special homage to those In-Kind donations which are at a very high level.

  4. Val says:

    I have a scenario I can’t work through on my own. There is a community festival being organized by a company. They have permission to charge for vendor spaces (tables) at this event. They have offered us one for free as a charity and have asked for a tax receipt for the cost of the table. It is not a service, it is an exchange of a product that they offer, but the product is not physical.

    Are we able to issue them a receipt and recognize them for their contribution?

    • Tony Poderis says:

      Val,
      I recommend you do as I suggest in my article above.

      That’s where your wording does not give an official value, as the IRS and the company’s finance manager/auditor would not be abke to claim it in the first place.

      The only way for a true value to be ascribed is for the company itself to know the actual costs expended. It’s totally up to them to come up with number and reconcile it with the IRS.

      What you can say with your thanks, is that “you understand that the cost of the table to the public is $_____, and we thank you for your favoring us with your generous gift of making the table available for our use.”

      You cite only what the cost would have been “retail,” and that you were the beneficiary while others are paying the charge.

      Nothing more.

      Figuring the actual cost to the company of a vendor table space and other accommodation, is certainly something you cannot agree to authorize, and certainly not for you to be able to calculate on your own.

  5. Ray Pope says:

    I have an unusual request for an in-kind letter from one of my board members. We have our board meetings around the country and one of the board members submitted their travel receipts to us. They expect us to provide them with an in-kind letter with the value of total travel expense be stated on the in-kind letter. This is not a budgeted line item. Should we provide a letter with the total dollar amount?

    • Tony Poderis says:

      Ray,
      The receipts will only be of use when the donor works them directly on their own to the IRS via the tax form.

      The receipts must cover only what can be directly applied to the board meeting—no extra expenses, for example, for staying longer in a hotel for other business.

      And the amounts submitted must be “reasonable.” Reasonable is hard to justify if, for example, the expenses were out of the norm for normal per diem relating to meals, mileage, etc. You simply cannot be responsible for what the donor declares and reports.

      Those, and other factors, make it impossible for you to flatly declare in a letter any amount which suggests that amount as being official, and eligible to submit as tax-deductions.

      Even so, your letter with such a certified In-Kind donation, would not be considered by a knowledgeable tax preparer and the IRS.

      That is what you must tell anyone asking for such documentation. You should only say thank you in an overall way for spending their own money on the organization’s behalf. It is up to such donors to exactly identify applicable and legal expenses for declaration.

      For “paper credit” to recognize such donations in your Annual Report and for other crediting of donations, try to obtain a fair and reasonable number and use it only for unofficial, public, recognition.

      You and your board members will learn a good deal about such travel expenses incurred as a non-profit volunteer by reading the following IRS Publication 526 section.

      http://www.irs.gov/publications/p526/ar02.html#en_US_2013_publink1000229682

  6. Dennis Mar says:

    Hello Tony,
    I learned so much from your article. And thank you taking the time to answer so many reader questions. Scrolling through them was like a quiz. I would read the question and then try to guess your answer. Analyzing the variety of situations gave me more confidence that I understand acknowledging in-kind donations.

    Too bad the time and expertise you donated to us readers isn’t tax-deductible!! :-)

    • Tony Poderis says:

      Greetings Dennis,
      We appreciate your comments and support.

      Each time I do take a crack at replying to the questions posed, I am somewhat like Hamlet: Just like him, it’s like “traveling into an “undiscover’d country.”

      That’s how it is sometimes with IRS regulations. Hence, the caveats about not being an attorney.

      Both the receivers and donors of such In-Kind donations must themselves keep up with the ever-changing rules.

      It is rather surprising how many readers’ questions are In-Kind-gift-prompted in the first place, and then to see the wide range of situations in which donors and recipients are involved.

      No matter what form they do take, In-Kind gifts are usually focused to the IRS regulation not allowing tax credit for services rendered.

      Getting an accredited appraisal of value for the donation of an article of art is one thing, but setting a value on one’s own time and professional skill, would be an exercise in futility.

      Your thoughtful reference to my own (and my colleagues’) “contributions” via our free website, is good example of just how impossible such a value would be to come up with and verify.

      It’s reward enough to know that in some way we are helpful to your fund-raising needs.

  7. VKaiser says:

    Tony,If a Person has a Trailer hitch built on to his private vehicle and then uses it to Trailer the property of a non-Profit organization,is this an IN Kind donation to be written off?

    • VKaiser says:

      also,he pay’s for the hitch out of his own pocket.

      • Tony Poderis says:

        The IRS Publication 526 will help you and your tax preparer regarding what, if any, tax benefit you may obtain.

        If the trailer hitch is used by you for personal and other use, and for the use and the charity’s benefit, unless there are operating expenses incurred, I do not see a tax break.

        If you built or paid for the hitch which is used exclusively for the benefit if the non-profit, then you may have some deduction based on the fair market value of the hitch. That is something only your tax adviser can determine from knowledge of the IRS rules.

        For your own generous donation of time and effort, you cannot obtain a tax break for your services.

        Check out the link’s categories.

        http://www.irs.gov/publications/p526/index.html

  8. Marsha Temple says:

    Is it inappropriate to pay a commission to those who solicit sponsorship on our behalf for in-kind sponsorship?
    MT

    • Tony Poderis says:

      Marsha,
      The several national associations of non-profits, and “accredited” professionals themselves, overwhelmingly regard such contingent-pay arrangements as being unethical.

      While I do share in that assertion, I think that such deals are more often made innocently enough, but without much thought as to the consequences.

      If a really large non-profit had a sponsorship opportunity which would result in significant corporate upport, leading both parties to more of a quid-pro-quo arrangement, then I do believe a commission-paid “broker” of sorts would fit in well.

      Even with a good deal of the money given in this way, the corporation would still have much of their money given in a philanthropic manner. But with so much publicity, entertaining and good will which the non-profit can generate and deliver, a broker, such as an advertising/PR firm or individual, could be engaged for commission pay to seek a sponsorship from their clients and other prospects.

      However, by far, most non-profit sponsorship arrangements are mostly, if not all, philanthropically driven. Here, an outside paid solicitor is just that, and the risk is that potential donors would not want to see their money going to such an entity.

      And your situation appears to be even more tricky. That is, paying cash for someone to solicit In-Kind donations. It seems to me that you would be dipping into your regular operating base of donations to pay the solicitor for In-Kind donations which may in many cases be difficult to assess for their actual worth to you relative to the pay out to the solicitor.

      The ultimate summation: Some say such deals are unethical. I say they are unworkable and more often than not, the non-profit loses in the end.

      Perhaps a reading of my article on this topic would help:

      — Sponsorships And Underwriting Campaigns: Would You Please Fund Our ___________?
      http://www.raise-funds.com/1999/sponsorships-and-underwriting-campaigns-would-you-please-fund-our/

  9. Jim Johnson says:

    As background, I am a graphic designer on long-term disability status from my former employer. Though I can still design, my former employer maintains that my work is no longer at a level he can use. As part of my LTD guidelines, I cannot make any income, so I have begun to donate graphic design projects to various non-profit organizations—both because I believe in them AND I want to remain as productive as I can, for as long as I can. I understand that “time” and “services” are not IRS deductible, but the fact that I am providing a tangible product (e.g., a letterhead, a DVD label and jacket, a large promotional banner, a prayer card, etc.) to me suggests more than simply a donation of the time spent to create those things. I have conscientiously filed Form 8283 for the past several years, listing my product donations and their FMV. Are these items deductible or not?

    • Tony Poderis says:

      Jim,
      Scroll down to read a number of Blog comments, some of which may apply to your situation. See the one from Avis and click onto the IRS Publication 526 link.

      There, you will confirm that you cannot deduct for your time or expertise—but you may have a very good chance to get credit for expenses you incur.

      Look for the “Contributions which you can deduct” link.

      • Jim Johnson says:

        Tony, thanks for your quick reply. Per your advice, I read the IRS Publication 526 link and noticed a line (pasted below; capped for emphasis) that describes perfectly what I am doing. It appears in the third paragraph below the subhead, “Deductions Over $500 But Not Over $5,000,” and reads:

        “If you claim a deduction over $500 but not over $5,000 for a noncash charitable contribution, you must have the acknowledgment and written records described under Deductions of At Least $250 But Not More Than $500 . Your records must also include:

        “How you got the property, for example, by purchase, gift, bequest, inheritance, or exchange,

        “The approximate date you got the property or, if CREATED, PRODUCED, or MANUFACTURED BY or for YOU, the approximate date the property was substantially completed. . .”

        What I would like to deduct is CREATED PROPERTY MANUFACTURED BY ME on my computer. Even cash donations take TIME to earn, but it’s the GIFT (cash), not the time spent to earn it, that is the deduction. Similarly, a brochure, logo, poster, banner, etc. (non-cash), not the time spent to create them, comprises the deductions. Time spent donating blood or traveling to a conference is one thing, but producing a tangible product that can be seen and handled, is something entirely different—that much seems obvious.

        At any rate, it now appears to me that the IRS, which by recent and damning revelations of incongruous behavior and practices, quite obviously disdains charitable giving of ANY kind to conservative—especially Christian—organizations, evidently makes NO distinction whatsoever between a donated PRODUCT and the TIME it took to create it. ALL aspects of graphic materials have been reduced to “time and services.” Is that how you read Publication 526, Tony?

        Thanks again for your valuable comments.

      • Tony Poderis says:

        Jim: It is important for me to try to stay away as best I can from interpreting IRS rules, this time relative to creating a product. Repeating that I am just an old non-profit fund-raising practitioner, and not one skilled in non-profit IRS laws, I stick to what my article is solely devoted to: that being how non-profits can publicly (not IRE-legally) recognize In-Kind donations.

        When I was consulting, I performed a good number of pro bono consulting engagements. I, too, created a product in the form of computer-generated meeting materials, solicitation kits, etc. But, my tax adviser could only declare for my benefit the out-of-pocket costs for the paper, binders, and other such material.

        I cannot account for the IRS’ way of stating what they say about such declarations. That is something you must settle for sure with them and with your own tax preparer.

        Try as I may, wanting to do more, there is a real risk of setting you in the wrong path if we settle on IRS non-profit law. Best to go where such legal matters can be aired and responded to.

  10. Cyndi Crook says:

    Can you direct me to some sample policies that cover this concept of placing in-kind donations – valued at their FMV – on donor walls or in annual reports? Thank you.

    • Tony Poderis says:

      Cyndi,
      Read, maybe again, the section toward the end of the article above, titled: “Recognize What it Would Have Cost You “Retail.” And the last item regarding how a client non-profit poorly treated my personal In-Kind Gift.

      Those examples will suggest that, if there are such policies to which you refer, those policies will range far and wide and case by case.

      We made it simple at the Cleveland Orchestra during my twenty years there as D of D, as I was the one responsible for donor recognition overall, and for specific listings on walls, Annual Reports and weekly concert programs. (My attitude is reflected in the two sections of the article as cited in this note.)

      Each year, our Annual Report’s Donor Recognition page listed all of the different dollar categories we felt were appropriate to the range of donations we received. Such a listing will naturally differ from one organization to another.

      The heading of the listing made clear that the respective donors listed reflected their total cash support to our Orchestra for that given Fiscal Year, including Annual Fund, payments of capital and endowment pledges, sponsorships, underwriting, the deductible portion of Patron tickets they bought for special events, and the Fair Market Value of In-Kind donations. This way of combining all of the cash and in-kind values in one amount was received with appreciation by our donors.

      There should be no problem in coming up with a FMV or a “what it would have cost us retail” general amount for any In-Kind donation, but as we continue to stress—we never cite those In-Kind values as “official.” That is up to the donor to declare with the help of the donor’s tax preparer. Even if you were not going to pay for it retail, you research, estimate, and evaluate the value for your listings in the same way.

  11. Avis S. says:

    Hello Tony,
    I am trying to prepare an in-kind receipt for an individual who is donating a house to our church. The property is appraised at $22,000. I believe that I am to include the appraiser’s information but I am not sure what other information should be included in this letter. Please share any knowledge it would be helpful. Thanks in advance

    • Tony Poderis says:

      Avis,
      All I can do—dare to do—not being an attorney or otherwise an expert in IRS rulings, is say what I do in my article about recognizing publicly “what we understand is the value of …”

      That exercise is to simply give as proper-as-possible credit for In-Kind donations. I call it “paper credit” for what that implies. Such acknowledgments may differ from donations of property of type to which you refer.

      Do read the IRS treatment of donated property and work from that information which you can read from the following link:

      http://www.irs.gov/publications/p526/ar02.html#en_US_2012_publink1000229703

      While that material seems to deal only with how the donor can or will report the donations to a non-profit, that still leads me to suggest the method I detail in my article above. However, such a tangible property now on your books may require special accounting and reporting which your accountant, attorney or auditor can provide.

  12. KS says:

    What about items donated specifically for the purpose of charity auction? Do those items need to be held by the organization for a period of time regardless of their value? If a donor makes non-cash contributions to an organization totaling more than $500, an 8283 must be filed to claim a deduction. If the donee disposes of said property within three years, an 8282 must be filed unless “the property the charitable organization received is consumed or distributed without consideration in fulfilling its charitable purpose or function.” What does “without consideration” mean?

    • Tony Poderis says:

      KS,
      I have been looking in vain to see where you picked up the quote regarding the use of an In-Kind donation in its proper IRS fulfillment.

      I am just an old fund-raising practitioner, and I am careful to avoid pronouncements about the rules and regulations of the IRS which change considerable and often. My article above simply suggests to the receiving charity how it can give proper and appreciated “paper credit” to the donor of an In-Kind gift. Nothing more do I dare assert, as the declarations of value must be justified and proven to the IRS by the In-Kind donors.

      However, It is new to me to get the impression of any such holding time the receiving charity must or must not observe when it comes to the use of the donated product or service. Some charity auction items never receive bids, and I suppose there would be concerns that a non-claimed TV, for example, may end up in the CEO”s home.

      I see some reference to what is cited as appropriate use, in keeping with the mission, in the short pieces you can access as follows:

      http://www.irs.gov/Charities-%26-Non-Profits/Charitable-Organizations/Charity-Auctions

      http://www.ehow.com/info_8151274_auction-items-charity-event-deductible.html

      Sorry I cannot be of help in the way you need. Your state’s Attorney General and the IRS, your accountant or attorney, all must be the providers of such counsel in the end.

  13. Amy says:

    Hello Tony,

    I’m sorry if you have answered this somewhere else in this comment thread:

    Our school booster association received a donation of a time-share vacation with a market value of $2,400. This vacation will be auctioned off at an event.

    How does the booster association declare the donation? Is it simply an income line item? What is the required acknowledgement to the donee? I know that the “winner” of the auction on this item only gets a receipt for a donation if they pay more than $2,400 for the item.

    Any assistance you can provide would be appreciated!

    • Tony Poderis says:

      Amy,
      What I can (and should) only do, is to suggest proper “paper credit” to In-Kind donors, as I have described in my article above.

      When it comes to other related issues of the type you describe, it would be best for all concerned to read the rules and regulations in:

      — IRS Publication 526.
      Specifically,
      Contributions you can and cannot deduct.
      http://www.irs.gov/publications/p526/index.html

      The answers are to be found there.

  14. Deborah says:

    Hi Tony,

    Many donors request a dollar amount to be in their gift-in-kind acknowlegement letter. Is it acceptable to write this? Your tax deductible donation of a garden bench which you value at $100.00 is appreciated.

    • Tony Poderis says:

      Hello Deborah,

      Unless the value is high, over $500, and you want to assist in helping a donor obtain a value certified by an accredited expert, you should not give any specific-sounding value to your In-Kind donors. Even with the example just cited, the donor needs to justify the amount and reconcile it with the IRS. You cannot do that.

      You should not make a dollar amount reference that in any way is coming from your organization as official. It would do the donor no good anyway when they work with their tax preparer.

      Read again my article above and from the example there work as best you can to acknowledge an amount, but best in the way I describe–”saving our organization what we might have spent retail.

      Otherwise, you are in no position to give donors an amount amounting to any certainty. Even with an invoice, there could easily be ways to have the amount overrated. Worse, is when something was given and the donor only told you what the item was worth.

      Remind the donos that there are many websites with examples of acceptable declaration value: See Salvation Army, for one. A search will turn up many more.

  15. Hope says:

    Hi Tony,
    I was recently approached by a group who wanted to run a fundraiser for my 501c3 organization. Afterward, I was asked to reimburse them for their expense. I sent them a thank you letter, but they want an in kind donation acknowledgement. Is reimbursement for out of pocket expenses, the same as in kind? I didn’t think they were one and the same. Thank you.
    Hope

    • Tony Poderis says:

      Hope,
      I am not clear on this. If you reimbursed them for their out-of-pocket expenses, meaning you paid a bill, then that has no part in any form of contribution. You paid for an expense they incurred. Or did you?

      You did not say you paid for their expense in fact, but that you seem to only have sent a thank you letter.

      Any declaration for tax benefit by the group is totally up to them, their accountants and the IRS. They may find that some of their expenses are deductible. They would find that any declaration for professional services donated would not be tax-deductible.

      You were asked to reimburse them. But, did you actually pay them?

  16. Nancy Grigsby says:

    How do you show the in-kind gifts of the Financial Statements for the organization?

  17. Doug Keiper says:

    Hi Tony – I had a vicar of a local church hire and pay for services to have lighting fixtures installed to the amount of $290.  They gave me a receipt from the company and a copy of their check and are now asking for an In-Kind letter.  Thoughts on how is should be worded?  Thanks for the help…Doug K.

    • Tony Poderis says:

      Doug: Happy to help. Seems you arranged the project. Did you do more than that in terms of professional services or money toward paying the company?

      The Church paid the company, gave you the receipt and check copy. But why would that be turned over to you?

      I see no In-Kind donation here, so please tell me where and how the Church sees it that way.

      • Doug Keiper says:

        The company was paid for out of the Vicar own personal funds and not church funds…and that is why the Vicar wants an in kind donation letter.

        Thanks

        Doug

        • Tony Poderis says:

          Doug: Just use language adapted from the example in my article above.

          The Vicar cannot declare any tax-deduction for his payment of the invoice.

          The credit, if any desired, would be only similar to how I suggest.

          Next time, the Vicar should consider having the Church pay the invoice, then the Vicar makes a tax-deductible contribution to the Church in the same amount.

          Legal and fully tax-deductible would be that donation to the Church to offset the payment of the expense.

  18. Shannon says:

    HI! I'm trying to draft a thank-you/acknowledgemnt letter for in-kind gifts and I'm grateful for your sample above. In trying to explore other options, I also found this online

     http://skydivingmuseum.org/LinkClick.aspx?fileticket=fek4DqU/AD0=

    and wondered what you thought??? This seems much more explicit in terms of value, rules, etc.  Do you think we should/should not do something similar? Our non-profit is a school and people are clamoring for "receipts" like this one for purchasing items like laptops and other important equipment for the classrooms. Does this museum fall into a different category than what you mentioned above or are they just misinformed about what they are supposed to send out?

     

    Thanks for your help!

    • Tony Poderis says:

      Shannon,
      The sample letter from the Skydiving Museum is not a receipt in terms of explicit value stated for the in-kind donations they receive. They should not/cannot make such a declaration.

      The language in their acknowledgment letter is simply taken from the IRS regulations. They are only stating in general terms what the donor “may” do regarding levels of in-kind donations’ reporting.

      Frankly, I think they would be better off by simply providing the link to the IRS ruling. Using the IRS text, with no reference to where the got it, does seem to make it a statement of their own. But still, note it is just general guideline language.

      Note as well their listing of the actual in-kind items received at the end of the letter. There are no values cited. There should not be. That is up to the donor and the donor’s tax advisor. They can only say thanks for saving us from paying $ _______ for those items which will be on display at the Museum.

      Use my article and the IRS rulings on in-kind donations to better educate your donors to the fact that, no matter that some are “clamoring for receipts,” you can only acknowledge what they gave in-kind in terms of item description and quantity received.

      As far as any reference to value is concerned, use my guide above as best and as often as you can to tell them that their in-kind donation was of $_______ value to your organization in terms that you did not need to spend that amount of money.

      See IRS Publication 526
      Scroll down to:
      Noncash Contributions
      http://www.irs.gov/publications/p526/ar02.html#en_US_2012_publink1000229839

  19. Sue says:

    Should 'gift cards' be recorded as In Kind donations?

    • Tony Poderis says:

      Sue, Begin with examining the IRS webpage devoted to Gift Cards.

      http://www.irs.gov/irb/2011-05_IRB/ar09.html

      For several years the IRS has referred to the regulations as "proposed," and apparently that is still so. From reading their proposed guidelines, gift cards seem to be less than in-kind donations as they are construed as being more of cash donations.

      Best to work with your accountant or attorney. The rules appeal confusing even as they are "proposed."

      The proposed Regulations appear 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.
      But, do click onto the link above and see what you can learn. And get advice straight from the IRS or from your financial advisors.

  20. Terry says:

    Still a bit confused – what is in-kind gift (if I provide services) to a non-profit, such as a church.

    I was approached by a friend actively engaged with his church. They just bought a property and need to spruce it up / maintenance.  They asked me about stump grinding cost.  I was going to write-up an invoice and show the normal bill, then donate all my cost and ask for an in-kind donation.

    Is this accurate and acceptable?

    • Tony Poderis says:

      Terry,
      In charitable contribution circles, an In-Kind contribution is a donation of goods or services, rather than cash, securities, or real estate/property.

      Your generous donation to the church of your stump grinding services definitely is an In-Kind donation.

      The receiving charity cannot give you an official statement of value from your invoice which you can then use to claim a tax deduction.

      As my above article suggests, the charity most certainly should give you a letter of grateful acknowledgment, and from what you provided to them, simply state their appreciation for “saving them from spending $ _______ for ridding the property of stumps.”

      They should use that value of what they would have paid in their publications to publicize and honor your donations of services. It’s what we call “paper credit,” meaning deserved recognition of the value for the public to see, but not for the IRS to accept as a claim for tax purposes.

      You have nothing you can declare to the IRS for the time you spend grinding stumps. You donated a service.

      What you could do, if your accountant agrees, is make an arrangement with the charity that you do provide a true invoice, which the charity then proceeds to pay the amount due to you—then you turn around and donate in cash that same amount which would then qualify for tax deduction purposes.

      Such an exchange is legal.

      You only need to know from your accountant if that procedure would be good for you, bearing in mind that, of course, you would need to pay tax on the income you received from the charity paying for your services. S

      ometimes this works to advantage, some times it does not. My guess is it would be a stretch for you to benefit with a worthwhile tax deduction for you to follow the procedure just outlined.

      For your interest regarding the ruling on such service donations, go to IRS Publication 526
      http://www.irs.gov/publications/p526/ar02.html

      See the third section, “Contributions You Cannot Deduct.”
      Click onto the sub-item, “Value of Time or Services.”

      As the IRS says there, “You cannot deduct the value of your time or services … “

  21. Marie says:

    Tony,

    We are having a fundraising, benefit concert and  we offer a sponsorship in the amount of $1,200.  Well one company wants to give us product for half of the sponsorship amount, is that considered in-kind? and how would we account for the product.

    Thank you for your assistance.

    • Tony Poderis says:

      Marie, First, to my way of thinking, it would depend upon the "product" offered to sponsor half of the event, for me to give such credit. Only if the product is truly related to the event in the sense it saves you money from buying such a product in the first place.

      If the product has a relevant and monetary benefit for you to accept to give half of the sponsorship, then indeed, it is an in-kind gift. You acknowledge it in exactly the way I suggest in my article above. Just public credit for what it would have cost you if …. if you had to pay for the product.

      No official sounding value in terms of what they can declare for tax purposes shoud be given by your organization. That must be left only to them to reconcile with the IRS.

  22. Perri Graham says:

    Tony,

    What about a situation where the donors are giving materials for a sale?  We have a re-use, re-cycle building materials store where our donors can give us appliances, model home furniture, building materials, etc.  How can I acknowledge these so that the businesses can take advantage of any deduction possible?  It's not as though we would go out and buy a dishwasher to sell in the store so they're not technically "saving" us money. 

    • Tony Poderis says:

      Perri,
      Those donors of such in-kind items may not be “saving” your organization money (as when you budget an expense for a need which is provided by an in-kind donation), but your good organization is certainly helping those whom you serve to help them keep from spending their few and precious dollars for what you give to them—if you are giving them those items, or selling to the needy at a very low rate.

      Or if you are selling items to the generall public and using the proceeds from sales to work your mission to serve.

      No matter, the donor of in-kind items handles any possible reporting of such gifts for tax purposes in the ssme way.

      To those donors of in-kind goods, you personalize each acknowledgement as best you can with what they gave to you with descriptions, quantity, and explain the “value” of the donation only in terms of the good it will do. You do not provide a dollar amount of what they said the cost was to them.

      The only way the such donors can “take advantage of any deduction possible,” is through their tax advisor. All you should do is thank them heartily and give as an exact description of the in-kind donation as possible. And always, as best you can, let them know the good their generous and thoughtful donation does for whom you serve.

  23. Susan Stern says:

    Hi Tony.
    Quick question. I am bit confused. If I were to donate my time as an Omaha marketer for such tasks like copywriting, graphic design, etc. to a non-profit, may I take an in-kind donation based on retail value of my services for tax purposes?

    • Tony Poderis says:

      Susan, Sorry to say … no.

      That is made clear in IRS Publication 526, though you should check the rules and ask your accountant about any relief you could have for some direct expenses related to your donation of professional time—that with the acknowledgement of the non-profit.

      Otherwise, you cannot declare your donated time for tax benefit purposes.

  24. Steve Forbes says:

    If a donor donates temporary housing to a staff member, would the use of this in-kind donation be reported as taxable income to the staff member? If so, what dollar value would be reported? Fair market  rental value or what?    

    • Tony Poderis says:

      Steve: If the free rent is for the personal use of the staff member, with no direct connection to that person's job, then he or she is simply getting free housing. There is nothing to declare.

      If the donation of the housing is in any way directly impacting on the mission workings of the organization, then the donor should get the proper "paper credit" if the housing was ordinarily a rental property.

      That would allow some value in dollars to thank the donor for. If not rental property, then there would be no dollar value to assign with the thanks—just give thanks.

  25. Kerri Craig says:

    Hi Tony, I've been trying to find the IRS Publication that says organizations are not supposed to put the value of in-kind donations on their letters. I couldn't find that wording in IRS 526.  In your article, you said "By law, non-profit organizations cannot provide a donor with the dollar value of an In-kind gift." Can you tell me where I can find that in IRS pubs? I need to be able to show my boss. Thanks, and great article!

    • Tony Poderis says:

      Kerri,
      I wanted to make a strong-as-possible admonition to non-profits from providing what could be construed as “official” valuation to an in-kind donor who might not know better, and would declare that value in a tax report at risk. The risk could be to the non-profit as well for erroneous reporting, even if inadventent.

      Thus, any such declaration, other than the type I suggest in my article, cannot, by law, be used by the donor. Such exacting declarations, when they meet the IRS’s requirements, are up to the donor or the in-kind donation.

      There are plenty of citations to that effect, and here are but a few.

      Center For Non-Profits
      Non-Cash Donations
      http://www.njnonprofits.org/giftsubs.html
      “The charity should not attempt to value the property; that is the donor’s responsibility."

      NOLO
      http://www.nolo.com/legal-encyclopedia/overpromising-tax-deductions-65348.html

       

  26. aimee polson says:

    How can one go about valuing anticipated in-kind work when calculating match for a grant? Yes, this is slightly off topic. Thanks.

    • Tony Poderis says:

      Actually, you are right on target. The issue is In-Kind gifts, with a unique twist, to be sure: one I have not heard of previously.

      So, thinking along with you, let’s say:

      — Will the matching grant entity accept the value of In-Kind gifts in the first place? If they are going to dispense cash, I should think that it would only be related to actual cash you raise.

      — However, if the potential grantor is willing to accept In-Kind donations to match its funds, is there a limit regarding percentage of such total evaluations, as companion to the cash and pledges most all campaigns and project funding receive?

      — Next, and the hardest, is if the valuations of In-Kind donations are accepted, how with the potential grantor expect the dollar valuations to be calculated to justify their respective cash match outlay?

      As you know, were a vendor/service provider/company to donate something of value, in-kind, the amount could be anything from the “retail” cost to wholesale, to manufacturing cost, to the value of out-of-stock items, liquidated goods, etc. Who is to know exactly, regarding any of those benchmarks, just what is the appropriate valuation?

      Because of those vagaries, I am surprised that a grantor of matching funds would allow their real cash to be given in matching to what are usually rather amorphous valuations of the things organizations receive from In-Kind donors. If you are able to work this process, that is good—providing the issues addressed above are answered satisfactorily. Good luck.

  27. Gale Carter says:

    If my nonprofit hosts one of those restuarant spirit nights where a percentage of the total profits brought in by our ministry are donated back to us, are we required to send a donation receipt to the restuarant or is this considered an in-kind donation?

    • Tony Poderis says:

      Gale, with the usual caveat that I am not a tax specialist, nonetheless, I will give to you my suggestions.

      This is an unusual type of fund-raiser, where the restaurant does indeed provide In-Kind facility use, personnel, security, food & drink, etc.

      However, in the end, they will present a check to your organization as a cash donation.

      Those funds are proceeds, usually a percentage, of the cost of meals paid for by patrons documented to be the ones you brought in as your "friends" in support of the event. They must present a form when they dine which will identify them for the restaurant to calculate the cost portion of their meals to be given to your organization.

      I think it would be a good idea to ask the restaurant manager for the name, or names, of charities which have gone before you with such "Spirit Nights," and ask how they handled the financial accounting.

      To my way of thinking,though, since you will be presented with an actual cash donation, it seems appropriate to acknowledge the same accordingly—with no "strings." That is, thank them for exact cash donation, but as well separately thank them for all of the true In-Kind donations they provided for the evening. It's this latter array of true In-Kind products and services you received which you should not attempt to acknowledge as an official value. OK to generalize the value, but never to make it sound official.

      In this case, it matters not how the cash donation came about, it's the fact that they presented a check in support of your organization.

      Now, internally at your organization, were you to have incurred expenses of your own connected to the event, it will be up to your officials regarding posting a gross, or net, receipt of the funds you received from the restaurant.

      Anyhow, that's how I see it. But, do ask others who have been in on such events.

  28. Mandy Wong says:

    Hi Tony,

    At one of our recent YP events, a photo booth rental was provided at a discount. The company who provided the rental set the value at $1,200, and the discounted rate (that we paid) was $250. Even though we paid the discounted rate, can we still provide an in-kind donation letter to the vendor? I've been searching all over the internet,and have not been able to find an answer.

    Thank you so much,
    Mandy

    • Tony Poderis says:

      Mandy, Just use the net amount, the sum after what you paid, to what the company said was the "retail" cost—and there you have the amount you can say thank you for to the donor as an In-Kind donation.

      How, and if, the company declares any claim to the IRS, is totally up to them. You do not provide what could be construed as an authorized donation value—as you would to a cash donor—but just a nice acknowledgment thanking them for saving you from spending another $950, which is money you need to spend on furthering your Mission.

      Do read my article again (above) which gives you such an example.

  29. Carrie says:

    We had a donor recently contribute a $500 airline ticket voucher which we will then use to pay for a flight of someone accompanying artifacts for our upcoming exhibit. Would this be recognized as an in-kind gift?

    • Tony Poderis says:

      Carrie, Yes, the donor of the voucher made an In-Kind donation.

      I suggest that you acknowledge and recognize the donation in the way described above in my article. Not as you would a cash donation, but thanks to the donor's generosity, that $500 In-Kind gift was as good as if you had spent that amount "retail."

      You should credit the donor in that amount when you make any donor listing, such as in your annual report. Again, using the examples cited in the article.

  30. DC says:

    Question. If a Fire Deptartment's personnel are offered the use of a gym by hotels in their response area to keep the personnel in shape for protecting the tax payers. Would this be legal or "in-kind"? If the latter, how should it be reported to make it ok?

    • Tony Poderis says:

      DC,
      It is legal, and it is definitely In-Kind.

      If you are “the” Fire Department, you simply send a thank-you letter with good detail of the In-Kind donation, and if possible, you can even cite an amount of money the department “would have” spent, were it not for the generosity of the hotel or hotels. Not an official declaration of a monetary-type donation, mind you, but just saying thanks for what it would have cost you otherwise. Read again the example in my article above.

      If you are “the” hotel,” you cannot declare a tax-deduction for the donation of the service you gave to the fire department. However, do check with your accountant or tax advisor for any possible business expense/tax benefit possible for such things as clean-up, security, extra utilities, or any other special “out-of-pocket” expense which the IRS may (or may not) allow. The fire department can only say thank you, and recognize your donation publicly with a declaration of the amount they did not need to spend, thanks to your donation. Any other possible tax break, must be determined according to the IRS regulations as set forth in their publication:
      http://www.irs.gov/publications/p526/index.html

  31. Monique says:

    Hello:) I am graduate student in Public Policy at Mills in Oakland. The Laurel District Association (LDA) is a 501(c)(3) property-based Business Improvement District (PBID) and I am hoping that they can receive in-kinded items like any other non-profit would. I have worked for several non-profits where I built incentive budgets from in-kind donations that I received. I am working on a community event proposal and I would make sure that this district qualifies can receive in-kind donations and can offer business that donate a thank you letter with tax ID listed (for tax deduction purposes).  Also, do you know what the cap is on gifting? thanks 
     

    • Tony Poderis says:

      Monique,
      You can get all you need by reading and heeding the rules in the IRS Publication 526 regarding the section devoted to non-cash gifts.

      My article relates to the "proper" recognition a non-profit can give to an in-kind donor.

      The publication will tell you all that you need to know from the standpoint of what the donors can claim with the IRS.

      The non-profit receivers of in-kind donations should only acknowledge what they were gifted, and they should avoid any references to caps or other exacting IRS regulations. Such declarations are up to the donors to determine with their tax advisors.

      IRS
      http://www.irs.gov/publications/p526/index.html
       

  32. Borie says:

    Recently I donated some goods to our church for a fundraiser. I was assuming that the amount they raised, will be considered as cash donation to the church.
    Was I wrong in my assumption?

    • Tony Poderis says:

      Borie, Sorry, but it matters not to you for tax purposes what your church will earn from the donations of others for your donation of goods. There is no connection, once you turn over your goods. However, if whatever amount the church earns from your goods, is an amount they will credit internally as your offering support, then that is simply a mutually-arrived at agreement between you and the church. What remains is for your church to simply acknowledge your donation—in the way I describe in the article above—and for you, perhaps with counsel from your tax preparer, to determine what tax break you can get for your in-kind donation. The church cannot do that for you. You could get a good start by reading and heeding the rules in the IRS Publication 526 regarding the section devoted to non-cash gifts. My article relates to the "proper" recognition a non-profit can give to an in-kind donor. The publication will tell you all that you need to know. IRS http://www.irs.gov/publications/p526/index.html If your question was only related to credit between you and your church, then that is something you work out together. My tax references were only to try to cover all of the bases possible with your question. Reply

  33. julie g. says:

    I can deduct from my taxes and 'in-kind' donation for something I purchased for the 501c3, yes?  e.g. In leiu of them paying for specific marketing materials, etc. I purchased and 'gifted' to them.  With a "retail receipt" I don't see any issue with getting a donation receipt from them for the item in full.  Yes? No?

    • Tony Poderis says:

      Julie, Best for you to read the rules in the IRS Publication 526 regarding the section devoted to non-cash gifts.
      My article relates to the "proper" recognition a non-profit can give to an in-kind donor.
      When it comes to IRS rules and regulations—which change often—I should not try to help with legal rulings. You should go to "the" source.
      The publication will tell you all that you need to know.
      IRS
      http://www.irs.gov/publications/p526/index.html

  34. Tony,
    I know that the IRS does not allow someone to deduct the value of time or services.  But are we allowed to recognize the donated time or service as a gift in kind?  For example, a company recently gave us a significant discount on the labor involved in doing some repair work at our offices.  Is it "legal" or accepted by general accounting standards to recognize this as income through a GIK?

    • Tony Poderis says:

      Patty,
      Yes, you are allowed to recognize and give public credit to that generous company which gave you that discount. As my article states, we are talking about recognition of the value donated, and not at all an official acknowledgment as a tax-deductible donation. They would know better anyway.

      Actually, you should do so as the best of courtesy and appreciation gestures.

      That amount of discount—the amount you would have paid “retail”—would be cited as such in your letter of appreciation.
      And you can relate that same donation in other ways to recognize the company; at a board meeting, in your newsletter, even a sign in the newly repaired offices.

      How, or if, you actually “account” for the savings in your financial budget statements, might depend if the initial full cost was included in your fiscal year expense budget in the first place. Thus the reduced cost, thanks to the donated labor time, could be reflected as such in your financial statement.

      If not so budgeted, I do not see any effect on the bottom-line of your expense budget for having it entered. But your organization may have a special line-item method of listing in-kind donations. Such action would simply be a “paper credit” if the work was not budgeted in the first place.

  35. Janina says:

    Hi Tony,
    Our non-profit received an event space (restaurant), wine, etc for a recent fundraising event at the restaurant.  The restaurant has not requested a tax letter, and probably will not.  Do we, as the non-profit, have a requirement to record the corresponding event expense and in-kind donation on our books, regardless of issuing a tax letter?
     

    • Tony Poderis says:

      Janina: I think you should handle the event in much the same way as you would any other fund-raising event on your books: your organization’s “out-of-pocket” expenses deducted from your gross income, which gives you the net profit (proceeds). In-kind donation estimates, or even actual costs, are declared as well, to offset what in essence you would have paid if not for the donation.

      We always did that for such fund-raisers as special line items in our overall budget.

      As far as the restaurant’s in-kind donation is concerned, while they have not requested a tax letter, even if they did, you could not declare anything they could use directly with the IRS.

      As my article above states, you cannot give information which may be construed as an “official” tax-deduction declaration, as you do when you receive cash.
      Anyway, you cannot know anyway exactly how much the restaurant donated, covering all they did for you, including using their space and other such intangibles. That is up to them, their accountant, and the IRS.

      What you should do is to gratefully acknowledge all they provided in some detail, then to declare how valuable their donation was as it made possible new and important funds to support your mission.

      If there is any way you can roughly know an overall value, then you could simply state that you “understand” that the restaurant provided In-Kind donations of approximately $_______, which you greatly appreciate and which made possible a most successful fund-raising benefit.

      They cannot, would not, use such an acknowledgment for tax purposes, but you have a thoughtful way to let them know to some degree that you recognize how much it cost them, and that it made a meaningful impact on fund-raising for your organization.

  36. Tony Poderis says:

    Nancy, My apology. Somehow, I missed your Comment. You are correct. Only the donation portion should be so recognized by your organization to the donor for tax purposes. The "fee," is just that—a charge for your services. The additional money is a donation.

  37. Nancy says:

    Hi Tony.
    We recently held an event where we charged guests a registration fee.  However, some guests also gave us donation in addition to paying the fee.  Some wrote one check that included both the donation and the registration fee.  For tax letter purposes, can you advise how I ought to go about it?  My guess is that only the donation portion of the contribution is recognized in the tax letter. Say for example, even if the check total is for $200 and $50 of that was for registration fee, we would send a tax letter for $150.  Am I correct?  
    Thank you in advance for the help.
    Nancy

  38. Tony Poderis says:

    Hello Rickeia,
    Not being an Attorney, nor an expert in non-profit law, nonetheless, from what I do know, she cannot claim those costs as a tax-deduction with the IRS.

    But, you can certainly provide “paper credit” and the type of recognition I  suggest in my article. See again the suggested letter format which cites the “value” to you, but not to the In-Kind donor.

    For that generous lady, and for your future reference, in the event you do not have the relevant IRS document, here is the link to see their Publication 526, which makes clear which are deductions and which are not, in the ….

    — IRS Publication 526
    http://www.irs.gov/publications/p526/index.html
    “Contributions You Can Deduct”
    “Contributions You Cannot Deduct”