There are many nuances of fundraising and accepting donations that require careful attention to rules and procedures.
Recently, a Director of Advancement posed the following scenario to his peers on the ISM e-list for Development. (Our e-lists are email-based resources that administrators can use to ask questions, share advice, and offer solutions.)
Michael Christopher—an ISM Advancement Consultant, mentor at ISM’s Advancement Academy, and Assistant Headmaster for Development at Lausanne Collegiate School—shared some great insight. We want to share the exchange to help other members of the community.
The Question
“We have a local floor installer who would like to donate 100% of labor and materials to install flooring in several rooms. The fair market value is approximately $6000+ in donated labor and materials."
"The company would like to receive free advertising on the digital scoreboard in our gymnasium in return. The fair market value for the scoreboard advertising is $800 for two years. This totals $1,600."
”My question: Is this forbidden by the IRS, or can I issue a modified in-kind gift receipt letter to the company, stating the company received $1,600 in advertising over two years in return for their donation?”
The Answer
It’s likely that the flooring company can only deduct the cost of materials. IRS Publication 526 (2017), Charitable Contributions says, “you cannot reduce the value of your time and services.”
Second, when that amount is determined, the company should deduct the value of the goods or services they receive in exchange for their gift from their anticipated donation. It would be your responsibility to spell that out for them.
From the IRS publication, Charitable Contributions—Substantiation and Disclosure Requirements.
"Goods and Services
The acknowledgment must describe goods or services an organization provides in exchange for a contribution of $250 or more. It must also provide a good faith estimate of the value of such goods or services because a donor must generally reduce the amount of the contribution deduction by the fair market value of the goods and services provided by the organization. Goods or services include cash, property, services, benefits or privileges."
We hope this provides insight you can use! Be sure to join our e-lists to ask questions and receive advice from your colleagues, and see ISM’s upcoming events for more guidance from fundraising industry leaders.
Additional ISM resources:
The Source for Advancement Vol. 16 No. 7 The First Step of Any Successful Fundraising Campaign
The Source for Advancement Vol. 16 No. 10 Helpful Hints for New Development Directors
Additional ISM resources for ISM members:
I&P Vol. 43 No. 4 Establish Best Practices for Managing Social Media Accounts
I&P Vol. 42 No. 6 The Donor Cycle
