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Quid Pro Quo Contributions

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This Fall, more and more nonprofits are starting to host virtual special events, taking place for some of the traditional in-person events. A number of nonprofits have creatively found ways to arrange for pickups of food, beverages, and other goodies to enjoy during the online event. Tickets for these events are generally partly a contribution and partly a payment for goods or services received by the donor.

When a donor makes a payment over $75 for an event or any other quid pro quo contribution, the nonprofit must provide a statement to the donor, providing a good faith estimate of the fair market value of the goods or services they received as part of their payment. This information is important so the donor can claim the correct amount as a charitable contribution for tax purposes. Another important reason to provide this information is that the IRS can impose penalties of $10 per contribution, up to a maximum of$5,000 per fundraiser, if the information is not provided to donors.

For a special event, the value of the goods or services is commonly referred to as direct donor benefits. Some common costs included in direct benefits to donors are:

  • Food
  • Beverage
  • Party favors
  • Decorations
  • Room rentals
  • Entertainment

The good faith estimate rule allows nonprofits to estimate the value of certain benefits provided to the donor that may not be precisely known until all invoices are settled, which could potentially be long after the event ends. The good faith estimate rule also allows nonprofits to consider similar goods or services if the benefit provided is unique and is otherwise unavailable.  Any reasonable method used for estimating the benefit’s fair value should be acceptable.

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