Quid Pro Quo Donations

Definition

A quid pro quo donation is one in which goods or services are provided to the donor, but the fair market value of the received benefit is less than the amount of the donation.

For example, if a donor gives a charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. In this example, the charitable contribution part of the payment is $60. Even though the deductible part of the payment is not more than $75, a disclosure statement (below) must be provided by the organization to the donor because the donor’s payment (quid pro quo contribution) is more than $75. Failure to make the required disclosure may result in a penalty to the organization.

Disclosure Statement

The required written disclosure statement must:

a. Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of any money (and the value of any property other than money) contributed by the donor over the fair market value of goods or services provided by the charity, and

b.  Provide the donor with a good faith estimate of the fair market value of the goods or services that the donor received.  The charity must furnish the statement in connection with either the solicitation or the receipt of the quid pro quo contribution.  If the disclosure statement is furnished in connection with a particular solicitation, it is not necessary for the organization to provide another statement when it actually receives the contribution.

No disclosure statement is required if any of the following is true:

1. The goods or services given to a donor have insubstantial value as described in Revenue Procedures 90-12 PDF and 92-49 PDF,
2. There is no donative element involved in a particular transaction with a charity (for example, there is generally no donative element involved in a visitor’s purchase from a museum gift shop).
3. There is only an intangible religious benefit provided to the donor.  The intangible religious benefit must be provided to the donor by an organization organized exclusively for religious purposes, and must be of a type that generally is not sold in a commercial transaction outside the donative context. For example, a donor who, for a payment, is granted admission to a religious ceremony for which there is no admission charge is provided an intangible religious benefit. A donor is not provided intangible religious benefits for payments made for tuition for education leading to a recognized degree, travel services, or consumer goods.
4. The donor makes a payment of $75 or less per year and receives only annual membership benefits that consist of:
   1. Any rights or privileges (other than the right to purchase tickets for college athletic events) that the taxpayer can exercise often during the membership period, such as free or discounted admissions or parking or preferred access to goods or services, or
   2. Admission to events that are open only to members and the cost per person of which is within the limits for low-cost articles described in Revenue Procedures 90-12 and 92-49 (as adjusted for inflation).  Also see the discussion of insubstantial value above.