A. A "quid pro quo contribution" is a contribution made partly as a donation and partly for goods or services provided to the donor by the charity6. Common examples are contributions by a donor to attend a charity's golf outing, dinner, or concert.
B. With quid pro quo contributions, a portion of the contribution is a donation and a portion is used by the charity to cover the cost of whatever the donor receives (the "benefit"). Donors can only deduct that portion of their donation that exceeds the fair market value (FMV) of the benefit they receive. If the total payment to the charity exceeds $75.00, then the charity must inform the donor in writing of the estimated FMV of any benefit received in return for the contribution.
C. The charity is responsible for estimating the FMV of the benefit received by the donor. Keep in mind that the cost of the benefit is not determinative of its FMV (although cost is often an important factor in determining the FMV).
- For example: ABC Inc., a 501(c)(3) charitable organization, holds a golf outing fundraiser at the Swanky Country Club. ABC charges $200.00 per golfer. Swanky County Club donates the use of the Country Club to ABC for this event (therefore, the cost for ABC is zero), but the actual FMV of the benefit (playing golf at the Swanky County Club) is $125.00 per donor/golfer. Here, $75.00 would be deductible ($200.00 ticket price, less the $125.00 FMV of the benefit). Because the donor/golfer's payment (quid pro quo contribution) exceeds $75.00, a disclosure statement must be furnished by ABC to each donor/golfer.
D. With quid pro quo contributions of $75 or more, the charity must do the following:
- inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of any money (and the value of any property other than money) contributed by the donor over the FMV of the benefit provided by the charity, and
- provide the donor with a good-faith estimate of the FMV of the benefit that the donor received (see example #3 below).7
E. Quid pro quo disclosures must be in writing, and they can appear either in the solicitation (e.g., in the invitation to the golf outing) or in the written acknowledgement of payment.
F. The Internal Revenue Code can impose financial penalties on charities that fail, without reasonable cause, to provide adequate quid pro quo acknowledgements.8
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