Quid Pro Quo Donations

Contributions where the donor receives goods or services in return are commonly referred to as “quid pro quo donations.” The amount of contribution is only tax-deductible to the extent a gift’s value exceeds the goods or services received in return. This is most commonly seen at fundraising events such as fundraising auctions.

For donations in excess of $75, charities must provide the donor with a written statement indicating the donor’s deduction is limited to the excess of the contribution over the value of any goods or services received in return. The statement normally must also give a good faith estimate of the value of the goods or services. Separate, unrelated payments made by the same donor need not be aggregated for determining if the $75 threshold is exceeded during the year. For quid pro quo (part contribution/part purchase) donations of $75 or less, the IRS presumably expects charities to voluntarily disclose to their donors how much of the contribution is deductible as a charitable contribution.

There is an IRS enforced penalty against organizations that do not disclose quid pro quo contributions in excess of $75. The penalty is $10 for each failure to provide the required written statement to the donor. The maximum penalty per fund-raising event or mailing is $5,000.

 

This post is part of series on handling donations — read the related articles on Donor Acknowledgements and Determining the Proper Date for Recognition of Contributions.

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