IRS Charitable Contribution Oversight

From the perspective of a charity, the IRS oversees charitable contributions in three main ways:

  1. The IRS requires nonprofits to disclose state charitable solicitation registration on IRS Form 990.
  2. The IRS regulates contributions that are tax-deductible on the donor's federal income taxes.
  3. The IRS requires disclosures when donations to a tax-exempt organizations will not be tax-deductible.

1.) Charitable Registration Statement on IRS Form 990

On your nonprofit's annual IRS Form 990 filing, you publicly release a statement of the states in which your organization is registered to solicit donations, your activities, and your financial situation. States or an individual donor checking the public records can easily see whether your organization is registered to fundraise in a specific state. Also keep in mind, anything submitted on the IRS Form 990 is legally assumed to be factual, under penalty of perjury.

2.) IRS Charitable Contributions

Donors that contribute to tax-exempt organizations enjoy a deduction on their personal or business federal income taxes. It behooves your nonprofit to assist in this process. The following tool is available for you to share with potential donors:

After receiving a donation, help donors substantiate their charitable contribution:

  • Provide written disclosure statements for contributions > $75 in exchange for goods or services (quid pro quo contributions).
  • Provide written acknowledgement for all donations >$250.
  • Maintain bank records or written communications from the donee for monetary contributions.
  • Claimed contributions >$5,000 often require an appraiser.

The tax code is complex: the IRS imposes deduction limits, special cases for property and vehicle donations, and more. Please consult IRS Pub 1771: Charitable Contributions - Substantiation and Disclosure Requirements and IRS Pub 526: Charitable Contributions for more information on what records your nonprofit shold provide donors and how you can assist donors with their tax compliance.

3.) Disclosure of Non-Deductability of Contributions

The IRS requires charities soliciting donations to disclose when contributions will NOT be tax-deductible to the donor for federal income tax purposes. (Internal Revenue Code §6113)

This requirement applies to tax-exempt organizations that are ineligible to receive tax-deductible contributions. There are a few exemptions. The most common are:

  • Organizations with annual gross receipts <$100,000 per fiscal year are exempt.
  • Campaigns soliciting less than 10 people per calendar year by letter or phone are exempt.

Please check Internal Revenue Code §6113 for the full list of exemptions and exemption criteria.

If your nonprofit needs to include this disclosure, here is what you need to know:

  • The disclosure must be "in a conspicuous and easily recognizable format".
  • The disclosure must be included on all fundraising solicitations. Solicitations include both contributions and gifts. The IRS definition of solicitations includes written, TV, radio, and phone requests.
  • Specific language and examples can be found at IRS Notice 88-120, 1988-2 C.B. 454