Advancement Services Report

Provided as a service of Bentz Whaley Flessner

Wednesday, February 6, 2008

Be The Quid Pro Quo Gatekeepers

Almost every philanthropic organization thanks its donors in appropriate ways. Many also give their major donors tokens of gratitude, invite them to events and galas, and fete them in creative ways.

This is all well and good, but often times in thanking donors non-profits run into the IRS' quid-pro-quo rules on contributions. Simple tschotkes are one thing, and are allowable under IRS rules. But the fancy dinners with open bars for leadership donors, the large plaques and the crystal vases often run afoul of the dollar limits set by the IRS.

The standards for this tax year are that the fair market value of the benefits does not exceed the lesser of 2% of the donations or $89, and that for a donation of $44.50, an organization can provide low-cost bearing the logo or insignia of the organization as long as they do not cost more than $8.90.

What many non-profits don't keep in mind is that the IRS does not care if the gifts are for lifetime giving or an annual gift of a certain level. They only care that the donor received something in exchange for their donation.

Donor recognition banquets seem to be the most common violation of quid-pro-quo rules. If a donor is expected to receive an invitation to this banquet, then these fall under the guidelines no matter if others who are not donors are also invited. So if a non-profit holds a fancy dinner each year and invites all donors over $2,500, along with notable prospects, leaders of the community and those that the non-profit serves, then the donors could be subject to the quid-pro-quo rules because they expected the invitation to this dinner.

We, as advancement services professionals, need to be vigilant in monitoring our organizations' compliance with these rules. It is not easy to wear the black hat in the office and keep reminding people about the IRS rules and regulations. Yet, it would be much worse to have a donor get caught in an IRS audit and have a large deduction denied because of quid-pro-quo violations, which also could have serious repercussions for the non-profit involved.

Read IRS publications 526 and 1771 and follow the industry list serves. There is always plenty of discussion regarding these topics.


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