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It's That Time of Year: Be Sure to Properly Acknowledge Your 2013 Donations

Your donors are the lifeblood of your organization. Without them your organization would be unable to carry out its mission.Therefore, it is critical that your organization take all the appropriate steps to ensure that your donors are able to claim the maximum deduction they are entitled to under federal tax law.

In particular, Section 170 of the Internal Revenue Code provides that a donor cannot claim a deduction for any contribution of $250 or more unless the donor has a contemporaneous written acknowledgment from the organization which states:

  • The name and address of the nonprofit organization;

  • The date of the donation;

  • The amount of cash and a description (but not the value) of any property other than cash contributed;

  • Whether the organization provided any goods or services to the donor inconsideration, in whole or in part, for the donation.

If goods or services are provided to the donor, the receipt must also include:

  • A description and good faith estimate of the value of any goods or services provided to the donor (such as the value of a meal provided at a gala dinner); or

  • If such goods or services consist solely of intangible religious benefits, a statement to that effect.

In order for the written acknowledgement to be contemporaneous the donor must receive it before the donor files his or her tax return for the year the donation is made. Therefore, now is a good time to review contributions of $250 or more made to your organization in 2013. Make sure that you provide the donor with a receipt that contains all the information required by Section 170.

In the past, the Tax Court has disallowed a donor's deduction because one of the required statements – such as an acknowledgement that no goods or services were provided in exchange for the donation – was missing from the receipt. And, once the taxpayer has filed his or her return, it is too late to correct any deficiencies in the receipt.

For more information, please check out IRS Publication 1771:Charitable Contributions: Substantiation and Disclosure Requirements.