Contributions/Event - #4

As we have discussed in our three previous posts, donors may receive something in exchange for a contribution. Whether it is a meal, a book, a video, all of these items are treated similarly. Remember the criteria for financial reporting?

What has been communicated to the donor and what is the donor’s intention in responding to the solicitation?

As we discussed in post #3, the direct donor benefits can be treated similar to cost of sales OR as a program or supporting service. Showing the expense as gross or disclosing the components of the value is the preferred reporting,

Similarly, the IRS requires recognition of donor benefits contributions to be made at the fair value of the exchange. The following is from the Tax Guide for Churches and Religious Organizations, published by the IRS:

A donor may only take a contribution deduction to the extent that his or her contribution exceeds the fair market value of the goods and services the donor receives in return for the contribution. Therefore, donors need to know the value of the goods or services. A church or religious organization must provide a written statement to a donor who makes a payment exceeding $75 partly as a contribution and partly for goods and services provided by the organization.

These reporting requirements are crucial in complying with the donor reporting requirements imposed by the IRS. Contributions need to be maintained with accurate support and evidence for each transaction.

The equation becomes even more complicated, if there are further considerations, prior to the event. What if the church spent an additional $10 per person advertising the event? What if the donor requested that the contributed funds be used for a specific purpose?

See our blog postings related to restricted or designated contributions.