On Nonprofits
©
May 2006
YOU DON’T EAT…
FULL DEDUCTION OR PARTIAL?
Q:
At a recent special event many donors sent in
contributions to attend the event and did not
show. I’m not sure how to handle the acknowledgement
letter. Should I recognize their gifts as 100%
tax deductible because they did not receive any
benefits? Or, should I acknowledge only the deductible
amount stated in the invitation, treating it as
if they did attend and reducing the tax deductible
portion by the fair market value of the benefits
they would have received had they come?
A:
This is another one of those questions that must
be answered, “It depends.” And, while
some of your ticket holders may be unhappy about
it, what it depends on is what they themselves
did – or didn’t do – prior to
the event.
If
they told you initially that they’d give
you a donation equal to the price of a ticket
but that you should keep the ticket – perhaps
try to resell it – because they had no intention
of actually attending the event, they would be
entitled to recognition of their gift at the 100%
level. The same would hold true for those that
initially accepted the ticket but sent it back
ahead of the event, specifying their desire to
turn their original ticket purchase into a pure
donation. However, anyone that just didn’t
show would receive the same recognition letter
as someone who did attend. This means that they
would get “credit” for only that portion
of the ticket price that was beyond the fair market
value of the benefits offered that evening.
Actually,
when you think about it, this is the most fair
for the organization. Undoubtedly, you had to
rent a room large enough to hold the expected
number of donors, guarantee a certain number of
meals and so on. The fact that some people didn’t
show at the last minute doesn’t release
you from your commitments. Also, just because
some of the people that bought the tickets were
unable to come, it doesn’t mean that they
didn’t give their tickets to others that
did benefit. In any case, the IRS says that those
that fail to turn back their tickets ahead of
time and make their donor intentions clear are
to get recognition for the ticket price minus
the fair market value of the event, just like
everyone else.
Terrie
Temkin, Ph.D. is an internationally recognized governance
and planning expert. She is president of NonProfit
Management Solutions, Inc., a principal in CoreStrategies
for Nonprofits, Inc., and a longtime member of AFP.
Contact her at terriet@nonprofitmanagementsolutions.com,
954-985-9489, or 866-985-9489.
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