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Posted on January 30, 2020

This article presents general guidelines for Georgia nonprofit organizations as of the date written and should not be construed as legal advice. Always consult an attorney to address your particular situation.

Remember that tote bag you got when you made a donation to public radio? Did you know that the IRS cares about the value of that bag? According to the IRS, if something of value is given to a donor in exchange for the donation (a “quid pro quo”), then the donor can only take a tax deduction for the amount of the donation less the value of the item given. But the IRS makes an exception to this requirement if the item is considered a “low cost article”. If the donor only receives a low-cost article (like a tote bag) in exchange for a donation, then the donor can deduct the full value of the donation. What is a “low-cost article” depends upon the amount of the donation and the cost of the article itself. The IRS adjusts these amounts each year for inflation.

In 2020, if a donor makes a donation of $56 or more and only receives in return a token item with the donee’s logo that costs not more than $11.20 (such as a mug or a pen), then the item is considered a low-cost article and the donor can deduct the full value of his or her donation.

Further, in 2020, if the donor receives something in return for a donation and the cost of that item is not more than 2% of the donation or $112 (whichever is less), then the donor can deduct the full value of his or her donation.

If your nonprofit is providing donors with an item in return for a donation, you will need to determine whether such item qualifies as a low-cost article. If the item qualifies, then it’s a good idea to include the following in your fundraising materials: “Under IRS guidelines, the estimated value of the benefits received is not substantial; therefore, the full amount of your payment may be a deductible contribution.”

If the item does not qualify as a low-cost item then you will need to treat it as a quid pro quo donation and include the additional language in your acknowledgment. See our article, Guide to Sending Acknowledgements for Donations, for guidance on acknowledging quid pro quo donations. In addition, if the item given in return for a donation does not qualify as a low-cost item then the transaction may be considered to be a purchase rather than a donation. For example, if someone pays $20 and receives a t-shirt in return, it looks like the person bought a shirt rather than made a donation. If a nonprofit regularly engages in such transactions, then it may have to pay unrelated business tax on the income from such purchases. For more information, see UBIT: Four Letters Your Nonprofit Needs to Know.

Posted on April 27, 2018

The IRS is launching a sweeping effort to advise taxpayers about the importance of doing a “paycheck checkup” as soon as possible to ensure that they are withholding properly from their paychecks. It is highly recommended that employers, including nonprofit corporations, share this information with their employees as soon as possible. Please see this link for an article providing additional information you should share with your employees so they can determine if they are withholding correctly from their paychecks.

Posted on July 30, 2014

On June 27, 2014, the IRS released a new form – Form 1023EZ — which will simplify and streamline the 501(c)(3) application process for small nonprofits without complex issues. This article covers the benefits of the new form and explains which nonprofits may take advantage of it.

Posted on June 2, 2014

File Your Form 990!
Here at Pro Bono Partnership of Atlanta, we continue to hear from nonprofits that have lost their 501(c)(3) status for failure to file their Form 990s or that are subject to large penalties by the IRS for filing their Form 990 late or for filing incorrect or incomplete versions. One of our clients recently received a notice from the IRS that it owes over $9000 in penalties for filing their Form 990 late. Avoid these costly mistakes by making sure to file the correct version of the Form
990 completely and on time. Remember, if your fiscal year ends on December 31,your 2013 Form 990 will be due on May 15 unless you get an extension in advance of that date. For other important information about filing Form 990s, please see
our FAQs on the topic.

Posted on March 17, 2014

In this useful resource, Metcalf Davis CPAs have added notes to a standard Form 990 to help nonprofit board members and officers review the form and understand the significance of various provisions.

Posted on June 26, 2012

Form 990 is the annual tax information return that 501(c)(3) tax-exempt organizations must file with the IRS each year. Even organizations that have not yet filed for 501(c)(3) status but intend to do so, or that have filed for 501(c)(3) status but have not yet received it, are required to file some version of the form with the IRS each year. Which version of the Form 990 that must be filed generally depends on the economic activity of the organization. This article answers basic questions about the Form 990.

Posted on December 7, 2011

The IRS now asks for more information in the revised IRS Form 990 regarding in-kind donations like clothing, cars and boats. This alert covers those reporting requirements, and the acknowledgement changes that could affect your donors.

Please note that in addition to the legal disclaimer above, this article contains information that is based, in whole or in part, on the laws of the District of Columbia. As a result, the information may not be appropriate for organizations operating outside the District of Columbia.

Posted on December 6, 2011

Even if your organization already has its 501(c)(3) status, the IRS can still take it away unless you do the right things. This guide covers activities that may jeopardize a charity’s exempt status, tax returns or notices that must be filed, recordkeeping, changes to be reported to the IRS, required public disclosures and resources for public charities.

Posted on December 6, 2011

Form 1023 is the form used to apply for recognition of tax-exempt status under Section 501(c)(3) of the Internal Revenue Code.

Posted on December 6, 2011

Are you interested in Applying for 501(c)(3) Tax Exempt Status? This informative booklet from the IRS answers questions such as why you should apply, who’s eligible, how to get started, and what responsibilities come with the status.