Our nonprofit uses a for-profit fundraising group that runs a fundraiser at which people are invited to come at no cost to learn about the program. The invitation indicates that they will be asked to give a contribution and that a meal will be provided. It is usually very successful. Acknowledgements provided to the donors indicate that "no goods or services were received in exchange for the donation." Is this appropriate since the attendees did receive a meal? Does the fact that the meal is provided "for free" to all whether a donation is given or not mean that we can legally say "no goods or services were received."
This is a good question and a procedure that is right on the edge. Section 6115 of the Tax Code requires a charity to notify a donor who makes a payment that is part contribution and “partly in consideration for goods or services” to notify the donor/payer that only the amount of the payment that is in excess of the value of the goods or services received in return is deductible as a contribution, and to make a good faith estimate of the value of such goods or services. Although the statutory requirement applies only to payments of more than $75, the basic concept on deductibility applies to most contributions. (See Ready Reference Page: “Charities Must Set Value on ‘Quid Pro Quo’ Gifts.”)
The question, therefore, is whether a person may attend without making a contribution and still receive the meal. If so, the meal would not be received “in consideration for” the payment. If everyone makes at least a suggested contribution, however, the IRS might argue that the meal was, in fact, a “quid pro quo” and limit deductions. I am the kind of guy who likes to participate in such events without making a contribution, just so the charity can protect its position that the donation is not a requirement.
The fact that the event is run by a for-profit fundraising group would not change the answer with respect to the deduction. But does the group have to register under the state charitable solicitation registration law as a fundraising counsel or solicitor, and if so, has it done so?
Wednesday, September 26, 2007
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