Center for Non-Profits - IRS Gift Substantiation Regulations

Center Logo

IRS Gift Substantiation Regulations

On December 13, 1996, the Internal Revenue Service published final regulations outlining substantiation and disclosure requirements for tax-deductible donations to charity. The regulations do not alter substantially existing procedures that have been in effect for the past two years, but do provide some clarification and examples to give charities guidance when preparing their disclosures.

Under the Omnibus Budget Reconciliation Act of 1993, a donor must obtain written substantiation of each single contribution of $250 or more in order to claim the gift as a charitable tax deduction. The substantiation must be obtained no later than the donor actually files his or her tax return for the year the donation was made, and must set out:

The amount of any cash the taxpayer paid and a description (but not necessarily the value) of any property other than cash the taxpayer transferred to the donee organization;

A statement of whether or not the donee organization provides any goods or services in consideration, in whole or in part, for any of the cash or other property transferred to the donee organization;

If the donee organization provides any goods or services other than intangible religious benefits (as described in section 170(f)(8) of the Internal Revenue Code), a description and good faith estimate of the value of those goods or services; and

If the donee organization provides any intangible religious benefits, a statement to that effect.

Although the responsibility of obtaining this substantiation lies with the donor, it is advisable (from both a management and goodwill perspective) for the charity to acknowledge such donations without waiting for a request.

When a charity provides a good or service in exchange for a contribution (also known as a "quid pro quo" contribution) in excess of $75, the charity is required to provide a written disclosure to the donor setting out the fair market value of the goods and services received, and informing the donor that only that portion of the purchase that exceeds this fair market value is tax-deductible.

The IRS regulations exclude from the disclosure requirement certain goods or services, such as those with insubstantial value or certain privileges and low-cost benefits provided to members when the membership paid is $75 per year or less. The rules also provide guidance for substantiating gifts made through payroll deductions.

Return to Main Legal/Management Page

Return to Home Page