Quid Pro Quo Disclosure and Acknowledgment Requirements

A quid pro quo contribution is a payment made partly as a contribution and partly for goods or services provided to the giver by the ministry. A giver may deduct only the amount of the contribution above what the goods or services are worth.

Ministries are required to provide an acknowledgment for all transactions where the giver makes a payment of $75 or more to the ministry and receives goods or services (other than intangible religious benefits or items of token value).

Form of the acknowledgment. Quid pro quo acknowledgments must:
  • Inform the giver that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of the amount of any money and the value of any property other than money contributed by the giver over the value of the goods or services provided by the ministry, and

  • Provide the giver with a good-faith estimate of the value of goods or services that the ministry is providing in exchange for the contribution.

Only single payments of more than $75 are subject to the quid pro quo rules. Payments are not cumulative. It is not a difference of $75 between the amount given by the giver and the value of the object received by the giver that triggers the disclosure requirements, but the amount actually paid by the giver.

Calculating the gift portion. It is not a requirement for the ministry receiving the gift to actually complete the subtraction of the benefit from a cash payment, showing the net charitable deduction. However, providing the net amount available for a charitable deduction is a good approach for clear communication with your givers.

When to make the required disclosures. The disclosure of the value of goods or services provided to a giver may be made in the giver solicitation as well as in the subsequent acknowledgment. However, sufficient information will generally not be available to make proper disclosure upon solicitation. For example, the value of a dinner may not be known at the time the solicitation is made. 

Goods provided to donors. A gift must generally be reduced by the fair market value of any premium, incentive, or other benefit received by the giver in exchange for the gift to determine the net charitable contribution. Common examples of premiums are books and Bibles. For payments of over $75, ministries must advise the giver of the fair market value of the premium or incentive and that the value is not deductible for tax purposes. 

Givers must reduce their charitable deduction by the fair market value of goods or services they receive even when the goods or services were donated to the ministry for use as premiums or gifts or when they were bought by the ministry at wholesale. Therefore, ministries cannot pass along to givers the savings realized by receiving products at no cost or buying products at a discount.

If givers receive benefits of insubstantial value, they are allowed a full tax deduction for the donation:

  • Low-cost items (low-cost items must be free to the giver and “low-cost” to the distributing ministry, or the ministry on whose behalf the item is distributed). If an item has a cost (not retail value) of less than an inflation-adjusted amount determined by the IRS, bears the name or logo of your ministry, is given in return for a donation of more than an inflation-adjusted amount determined by the IRS, the giver may claim a charitable deduction for the full amount of the donation. Examples of items that often qualify as tokens are coffee mugs, key chains, bookmarks, and calendars.

    If a ministry sends unsolicited, low-cost items at no charge to the giver as part of a fundraising effort, givers are not required to make a deduction from the amount contributed (Revenue Procedure 92-49).

  • De minimis benefits. benefits. A giver can take a full deduction if the fair market value of the benefit received in connection with a gift does not exceed 2% of the donation or an inflation-adjusted amount determined by the IRS, whichever is less.

Click here for sample acknowledgment document.

  


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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