Sending a thank you note after receiving a charitable gift to your nonprofit seems like a simple, but polite, way to recognize a donor. In reality, this acknowledgement is an extremely important piece of the donor/nonprofit relationship.
More Than Thank You
A thank you note is truly more than just a thank you. The IRS imposes recordkeeping and substantiation rules to both nonprofits and to donors.
Donors are responsible for obtaining written acknowledgment from a charity if a single contribution is greater than $250 before claiming it on their tax return. Thank you notes can be for each single contribution for over $250, or a year-end or annual summary of all contributions.
Nonprofits are also required to provide written disclosure to a donor who makes a single payment in excess of $75 and receives goods or services in exchange. There is no requirement as to how the written disclosure is provided. You may choose to share these written acknowledgements electronically, on a postcard or in a letter.
What Should be Included in a Thank You Note
Thank you letters as a written acknowledgement should include the following:
- The name of the organization
- The amount of the cash contribution
- A description (but NOT the value) of a NON-cash contribution
- A statement that no goods or services were provided by the organization in return for the contribution (if that is the case)
- A description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution.
- If no goods or services were provided, a statement as such
What Constitutes Goods and Services for Donor Acknowledgement?
A nonprofit organization does not have to include insubstantial goods and services in the donor acknowledgements. Insubstantial generally means:
- The fair market value of the benefits received does not exceed the lesser of 2% of the payment of $113*
- The payment is at least $56.50*, and the only item provided bears the organization’s name or logo (e.g. calendars, mugs, posters, etc.) and the cost of these items is within the limit for “low-cost articles”, of $11.30*
*these values are for 2021 and are subject to annual inflation
When should they be sent?
If the intention is to send a thank you note for each $250 donation, it’s great practice to get them out within 30 days of receipt of the gift. Written acknowledgements should be provided no later than January 31 following the year of contribution.
Please note, the above scenarios are not all inclusive and do not apply to a donated vehicle, boat or airplane in excess of $500 value. They also do not cover memberships, intangible religious benefits, unreimbursed expenses or quid pro quo contributions.
We’re Here to Help
Still unsure about how to thank your donors for their contributions? Corrigan Krause has a team of professionals who specialize in the non-profit sector. Email email@example.com to learn more.
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