Quid Pro Quo Contributions: Charity Disclosure Rules

When the disclosure requirement applies

A quid pro quo contribution is a donor payment made partly as a contribution and partly in exchange for goods or services from a charity.

The charity must provide a disclosure statement when the donor’s total quid pro quo payment exceeds $75. The threshold applies to the full payment, even when the potentially deductible portion is $75 or less.

Practically, preparers should test the amount of the donor’s entire payment against the threshold rather than looking only at the portion exceeding the value of the goods or services.

Required content and timing

The charity must furnish the disclosure in connection with either the solicitation or the receipt of the contribution. If the charity provides it with a particular solicitation, it does not have to provide the same disclosure again when it receives the related contribution.

Practically, a charity may satisfy the timing rule at the solicitation stage, provided the disclosure relates to that particular solicitation.

• The written disclosure must state that the amount deductible for federal purposes is limited to the contribution in excess of the fair market value of the goods or services the charity provided.
• The written disclosure must also give a good-faith estimate of the fair market value of the goods or services the donor received.

Exceptions to disclosure

The intangible religious benefit exception applies only to qualifying benefits provided by an organization organized exclusively for religious purposes that generally are not commercially sold outside the donative context. Degree-related tuition, travel services, and consumer goods are not intangible religious benefits.

A donor payment of $75 or less per year does not require disclosure when the donor receives only specified annual membership benefits.

• Disclosure is not required when the goods or services furnished to the donor have insubstantial value under Revenue Procedures 90-12 and 92-49.
• Disclosure is not required for a transaction with no donative element.
• Disclosure is not required when the donor receives only an intangible religious benefit.
• Qualifying annual membership benefits include rights or privileges that may be exercised frequently, other than the right to purchase tickets to college athletic events.
• They also include admission to members-only events when the per-person cost is within the inflation-adjusted low-cost article limits under Revenue Procedures 90-12 and 92-49.

Estimating fair market value

A charity may estimate the fair market value of the goods or services using any reasonable method applied in good faith.

When the goods or services are not generally available commercially, the charity may refer to similar or comparable goods or services in making its estimate.

Practically, the estimate need not depend on an identical commercial offering when no such offering is generally available; comparable goods or services may be used instead.

Penalty for nondisclosure

A charity that does not make a required disclosure for a quid pro quo contribution exceeding $75 is subject to a penalty.

The penalty is $10 for each contribution, subject to a $5,000 cap for each fundraising event or mailing.

The charity can avoid the penalty by showing that the disclosure failure resulted from reasonable cause.