|
2c.
Gross Receipts Less Than $25,000 You may read or hear that IRS Form 990, the annual "Return of Organization Exempt From
Income Tax," is not required when gross receipts are less than $25,000. This information is outdated. Beginning in
2008, public charities with gross receipts normally less than $25,000 will have a filing requirement, but it will not
be as extensive as Form 990 or 990-EZ. For details, please scroll down and click on "E-Postcard/Form 990-N."
3a. Donor
Substantiation Three sets of IRS tax rules govern how a 501(c)(3) organization must acknowledge payments from donors:
I. Section 170(f)(8) of the Internal Revenue Code disallows any contribu- tion of $250 or more unless the taxpayer has
contemporaneous written substantiation of the donation from the charitable recipient. There is no IRS penalty to the charity
for failing to provide donors with this written substantiation. II. Section 6115 of the Internal Revenue Code requires
charities to provide donors with a good faith estimate of the value of goods or services pro- vided, where a payment of more
than $75* is received which is partly a contribution, and partly consideration for goods or services. The penalty
for failure to provide the allocation required is $10 per contribution, with a maximum penalty of $5,000 per fundraising
event. (*indexed to inflation, see c(i) below) III. Revenue Procedure 90-12 provides that "insubstantial benefits" provided
to donors may be disregarded, for purposes of determining the deductible amount, when (i) the fair market value of all the
benefits is not more than 2% of the total payment, or $89, whichever is less, or (ii) the contribution is $44.50
or more, and benefits are only name- or logo- bearing "tokens" with a cost of $8.90 or less (2007 amounts; new ones,
indexed to inflation, issued annually) Taken together, IRS rules require that an organization's written acknowl- edgments
to donors should contain at least: - a statement of the amount of the donation, if cash - a description of the property
donated, if property (no estimate of the value is required) - a statement of whether the donee organization provided any
goods or services in return for the payment, and - if goods or services were provided, a good faith estimate of value of
the goods/services supplied The information outlined must be provided - in writing, - in connection with the solicitation,
or in connection with receipt of the payment, and - in a manner reasonably likely to come to the attention of the donor
These rules do not apply when there is no gift or donation intended, such as a purchase in a museum gift shop. No estimate
of the value of services provided is required where the recipient organization is exclusively reli- gious, and the only benefits
are "intangible religious benefits."
3b. Sample Acknowledgment Letter CHARITABLE EDUCATIONAL
ORGANIZATIONStreet Address City, State, Zip Phone Number
Date
Donor Name Donor Address Donor City, State, ZIP Dear ____________________, Thank you for your contribution of_________________.
(If contribution is property rather than cash, a detailed description appears below.) Please keep this written acknowledgment
of your donation for your tax records. The IRS will not accept your canceled check as proof of any donation of $250
or more. Tax law also requires us to estimate the value of goods or services, if any, that have been rendered to you in
return for your contribution, and to remind you that your contribution is deductible only to the extent that it exceeds
what we have provided. Thank you for your continuing support for our important work in this field! Very truly yours,
Name of Letter Writer Description of donated property: ___________________________________________ ___________________________________________
(It is the responsibility of the donor to determine the fair market value of the donated items.) Estimate of the value
of goods or services provided in return: ____________________________________________ ____________________________________________
__ No goods or services were provided. __ No estimate is provided because the payment was less than $75.
4. Disclosure
Laws All 501(c) organizations must make copies of their annual returns and exemption applications available for public
inspection, and must provide copies upon request. Internal Revenue Code Section 6652 provides a variety of penalties for
failure to meet these requirements.
5. Public Support Requirements Most 501(c)(3) public charities need to receive at
least one third of their support from the general public to maintain their public charity classification. It pays to learn
the public support rules and keep an eye on your one third support test, or to hire a professional to look this over from
time to time. Good recordkeeping can really help. In addition to basic information about your group’s income, the IRS will
want to know detailed information about larger donations your organization receives. It may be helpful for your accountant,
bookkeeper, or treasurer, to review Form 8734 in order to be aware of the information that will be needed, and to create
a system for retrieving these details. Some organizations receive little or no cash support during their early years. If
you anticipate this will be true of your group, do your best to cap- ture every scrap of information about the support your
group receives. This means that your organization’s books and records should reflect donation income when folks pay expenses
on your behalf (annual filing fees, long distance phone, etc.) and when mundane items (used office furniture, cof- fee supplies,
stamps, etc.) are donated. It may also be helpful to keep a record of volunteer hours and donated facilities. These receipts
are ignored for purposes of the public support tests, but if your group falls short of one third public support, this infor-
mation may help your group meet the alternate "Facts & Circumstances" public support test.
|
