Tax Planning and Compliance for Tax-Exempt Organizations, 6th Edition

CHAPTER 24Deductibility and Disclosures

• 24.1 Overview of Deductibility
  • (a) Contribution Defined
  • (b) Limitations on Deductions
  • (c) Business “Donations”
  • (d) Planned Gifts
• 24.2 The Substantiation and Quid Pro Quo Rules
  • (a) History of Disclosure Rules
  • (b) Substantiation Rules
  • (c) Quid Pro Quo Disclosure Rules
• 24.3 Valuing Donor Benefits
  • (a) The de Minimis Rule
  • (b) Benefits that Need Not Be Valued
• 24.4 Unrelated Business Income Aspects of Fund-Raising
• 24.5 State and Local Regulations

Tax-exempt organizations must be mindful of the income tax consequences of payments received from their supporters, for a couple of reasons. First, an organization can enhance its development activity by seeking payments that are fully deductible as either a contribution or a business expense. Second, organizations are required to disclose the tax character of payments solicited from their supporters. Penalties can be imposed on organizations that fail to provide proper tax information. This chapter briefly outlines standards for tax deductibility and describes the different types of disclosure rules applicable to §501(c)(3) organizations. Special disclosure rules applicable to social welfare organizations, business leagues, and labor unions are discussed in Chapters 6, 7, and 8.

Crowdfunding, the amazing Internet-based method of raising funds, is predicted to bring in more than $90 billion annually by 2020.¹ The tax consequences to the recipients of the funds and “donors” to the fund depend ...