The Nonprofit FAQ

How should we acknowledge in-kind gifts?

Tony Poderis wrote to the NONPROFIT list (see http://www.rain.org/mailman/listinfo/nonprofit) on June 20, 2001 and on April 26, 2004: A non-profit organization must not make outright official-sounding declarations of in-kind gift values to donors as the donors could be inadvertently led to take tax deductions in error. Therefore, this unique aspect surrounding in-kind gifts often causes us to acknowledge them in under-stated and almost off-hand ways --- unlike the clearly-stated amounts we cite for gifts of cash and securities. As well, with gifts of cash and securities, we can directly relate their value to specific programs and services made possible by such support. We do not necessarily express appreciation for in-kind gifts as effectively and graphically. Declarations of value which non-profit organizations might assign to donated objects, products, or services will not be of use to donors to claim for tax-deductions. Such valuations need to be assessed and certified elsewhere --- if they can be --- and that is the donors' responsibility. That is something they subsequently need to resolve with the professionals who will prepare their tax forms --- whose work in turn will need to be reconciled with IRS regulations. I always tried to acknowledge in-kind gifts with descriptions of their practical value to us and to make some reference of their worth to us in dollars without confusing the tax declaration issue. I suggest that you could treat your in-kind gifts in somewhat the following way, using an example of furniture donated to your organization: "Thank you for your generous gift of office furniture to (organization) which will enable our staff to carry out their duties more efficiently and in a most pleasant work-conducive setting. Please consult your tax specialist for any possible benefit to you for your contribution of seven pieces of furniture (list and descriptions attached) which were delivered to us on June 20, 2001. But for your generosity, we would have had to expend approximately $15,000 for that much-needed furniture. These are dollars we are able to directly apply to support the programs and services we provide to carry out our mission to (brief mission statement)." If the gift was for an auction, the letter might read: "Thank you for your generous contribution of a custom made men's suit to (organization) which will enable our upcoming Auction Gala to be a great success. Your gift will surely encourage one of our patrons to contribute the highest bid amount for the garment, thus providing important funds in support of our organization. Please consult your tax specialist for any possible benefit to you for your contribution of the custom made suit, which we understand has a retail value of $500, and which we will cite in the Auction publication and at our display to encourage the bidding to that level and above. Your letter of confirmation, dated (date), has been received. The dollars raised by the auction of your garment will be directly applied to support the programs and services we provide for the well-being of our community." A suggestion, from a practice of twenty years in an organization that that had many events supported by in-kind donations of products and services. That is, in appreciation for in-kind contributions, we always publicly recognized those gifts in annual reports with the donors' names listed under the respective gift category of what the objects, products, or services would have cost us "retail." Naturally those figures would not be IRS-deductible amounts either, but such public gestures on our part regarding the "market worth" of the in-kind gifts to our organization was always greatly appreciated by the donors. Posted 6/29/01; 4/27/04 -- PB