Gift Substantiation & Acknowledgement 

Gift substantiation

Documentation of proper gift valuation is critical for both donors and
charities. Although the responsibility resides with the donor to obtain the correct acknowledgement, development organizations should send a written and timely acknowledgement of the transaction that includes the following information:

1. Name of the organization,
2. Amount of cash contribution or a description (but not value) of a noncash
   contribution,
3. Statement that “no goods or services were provided by the organization,” or
4. A description and good faith estimate of the value of goods or services that the organization provided to the donor. An estimate of the value of goods and services provided is not required for “insubstantial" items as defined each year by the IRS.

For 2010, the IRS had defined gifts as fully deductible if:

• The fair market value (FMV) of the benefits received does not exceed the lesser of two percent of the payment or $96; or
• The donor gave $48 or more and received a gift or service valued at $9.60 or less; or
• The donor received small items as part of the appeal that were worth a total or no more than $9.60.

Quid pro quo contributions

A charitable organization is required to provide a written disclosure to a donor who receives goods or services in exchange for a single payment in excess of $75—a quid pro quo contribution. The charity should disclose to the donor before or at the time of the donation:

1. The amount of the charitable deduction, which is the difference between what the donor paid and the FMV of the item received, and
2. A good faith estimate of the FMV of the item.

Auctions

A disclosure statement is also required for the sale of auction items which includes all the information listed above. In addition, the charity must provide an acknowledgement that includes a description of the item, the amount paid, and a statement to seek professional advice on the value and tax consequences. It is not a deductible donation if an individual pays less than fair market value for an item, and it is the responsibility of the donor to prove prior knowledge of the fair market value. In order to help their donors, many institutions publish a guide
to the auction that includes fair market value of each item.

Noncash charitable contributions

There are additional requirements for the donor and organization if a donor
makes a non-cash or stock gift valued at over $5,000. The donor must obtain a qualified appraisal, and attach IRS Form 8283 to their tax return, and the charitable organization must sign Part IV of Section B of the form. If a non-cash or stock gift is more than $500, and the charity sells, exchanges or disposes of the property within three years, the charity must fi le IRS Form 8282 within 125 days of the disposition and a copy provided to the donor, unless the property is distributed for charitable purposes.