You may be aware of the rule for sending an acknowledgement to a donor after receiving a contribution, but are you also aware of the IRS requirements when someone attends a fundraising event? Usually, special events provide some sort of benefit back to the attendee, so that only a portion of their ticket cost is actually a contribution. For example, they may receive a meal, drinks, valet parking, entertainment, etc. in exchange for the amount paid. If it is a true fundraising event, the ticket cost will be greater than the value of the benefit they receive so that there is a contribution portion built in to the cost. The nonprofit entity operating the event is required by the IRS to provide a written statement to the attendee, which must include:
- A statement to inform the attendee that only a portion of their ticket cost is a donation and tax deductible and that this portion is limited to the amount that is in excess of the fair market value of what was provided by the charity.
- A “good faith estimate” of the fair market value of what the attendee received at the event.
This written statement can be in a thank you letter or acknowledgement after the event takes place, or it can be included on the invitation provided to the attendee prior to the event.
If the nonprofit organization does not meet these requirements, they can be penalized by the IRS in the amount of $10 per attendee.
By Colette Kamps, CPA