Taxable Benefits with multiple gifts

Hi Adrienne,

We recently discussed this issue with our auditors.  Though the rules are different everywhere, this is what we understand from our meetings with them this past summer.

For starters, a donor cannot determine which benefits they want to use and what they don’t: it’s all or nothing.  They cannot change their mind mid-year or come back later and say, “I didn’t use these benefits so I want my gift to be x% tax deductible.”  We include this language on all of our membership renewals, gift proposals, etc.   Our auditors have also been very clear with us that we are not tax advisors, and as such, it is a conversation the donor should have with their personal advisors who can contact us personally should they have any questions about how we determine our tax deductible values.  If the donor determines they would like to claim a different amount of tax deductibility, that’s between the them and their advisor, and we are unable to provide a letter that reflects their preferred tax deductible value.

Example of our language:

“In compliance with the Internal Revenue Service, a charity must determine the market value of benefits and list the deductible and non-deductible amounts for contributions.

Segerstrom Center for the Arts advises you to seek your own legal and tax advice in connection with gift and planning matters.  The Center does not provide legal or tax advice.  This communication (including any attachments) may not be used for the purpose of avoiding tax related penalties.

Patron of Tribute - $ [ Dollar Range of Membership Level ]

Segerstrom Center for the Arts estimates the value of Patron of Tribute membership services and events at $ xxx per year.” (the non-deductible amount)

We only provide the estimated FMV for a given membership level.  It is up to the patron and their tax advisor to determine how to value their own contribution to Segerstrom Center.  For that reason, we only provide the amount that is not tax deductible.

As far as benefits are concerned, if it is a time sensitive event that they’ve missed, we will generally try to work with the donors who are interested in that benefit to invite them to another experience that is of equal or greater value as good stewardship, or we also occasionally extend their membership term so they will be eligible the next time around.  Generally, the donor gets to attend an experience that would otherwise not be available to them at their level and it benefits twofold: they are thrilled to attend such an experience and we’ve introduced them to benefits that would be accessible to them with an increased gift.

In regard to your question about increased giving and tax acknowledgements, this is an area that we are working on with our auditors.  We basically do what you described below: if the first give is $100 and the FMV is $20, we send a receipt that says $20 is not tax deductible.  If they second gift is $150 (upgrading them to a $250 donor) with a FMV of $50 (FMV on the total amount of $250, not the gift of $150), we send a letter that states $50 is not tax deductible and note the new membership level. 

Example:

Donor A: $100 donation with FMV of $20 – gets a letter saying $20 is not tax deductible

Donor B: $150 donation with FMV of $30 – gets a letter saying $30 is not tax deductible

Donor C: $100 donation + additional $150 donation = FMV of $50- first letter says $20 is not tax deductible, second letter says $50 is not tax deductible for their increased membership level

Though the auditors don’t see a major problem with this method, they did mention that they have some concern that the second letter does not state something to the effect, “Your additional gift has an increased FMV of $10. Your revised FMV is $30.  Please disregard any previously estimated values” or “This FMV replaces any previously provided estimated value.”  They understand how tedious this could be, but have noted it as an area of improvement.  We’re still trying to figure out the best way to handle this situation.

That may be more information than you bargained for, but I hope it helps!!

Best,

Amber

Hi Adrienne,

We recently discussed this issue with our auditors.  Though the rules are different everywhere, this is what we understand from our meetings with them this past summer.

For starters, a donor cannot determine which benefits they want to use and what they don’t: it’s all or nothing.  They cannot change their mind mid-year or come back later and say, “I didn’t use these benefits so I want my gift to be x% tax deductible.”  We include this language on all of our membership renewals, gift proposals, etc.   Our auditors have also been very clear with us that we are not tax advisors, and as such, it is a conversation the donor should have with their personal advisors who can contact us personally should they have any questions about how we determine our tax deductible values.  If the donor determines they would like to claim a different amount of tax deductibility, that’s between the them and their advisor, and we are unable to provide a letter that reflects their preferred tax deductible value.

Example of our language:

“In compliance with the Internal Revenue Service, a charity must determine the market value of benefits and list the deductible and non-deductible amounts for contributions.

Segerstrom Center for the Arts advises you to seek your own legal and tax advice in connection with gift and planning matters.  The Center does not provide legal or tax advice.  This communication (including any attachments) may not be used for the purpose of avoiding tax related penalties.

Patron of Tribute - $ [ Dollar Range of Membership Level ]

Segerstrom Center for the Arts estimates the value of Patron of Tribute membership services and events at $ xxx per year.” (the non-deductible amount)

We only provide the estimated FMV for a given membership level.  It is up to the patron and their tax advisor to determine how to value their own contribution to Segerstrom Center.  For that reason, we only provide the amount that is not tax deductible.

As far as benefits are concerned, if it is a time sensitive event that they’ve missed, we will generally try to work with the donors who are interested in that benefit to invite them to another experience that is of equal or greater value as good stewardship, or we also occasionally extend their membership term so they will be eligible the next time around.  Generally, the donor gets to attend an experience that would otherwise not be available to them at their level and it benefits twofold: they are thrilled to attend such an experience and we’ve introduced them to benefits that would be accessible to them with an increased gift.

In regard to your question about increased giving and tax acknowledgements, this is an area that we are working on with our auditors.  We basically do what you described below: if the first give is $100 and the FMV is $20, we send a receipt that says $20 is not tax deductible.  If they second gift is $150 (upgrading them to a $250 donor) with a FMV of $50 (FMV on the total amount of $250, not the gift of $150), we send a letter that states $50 is not tax deductible and note the new membership level. 

Example:

Donor A: $100 donation with FMV of $20 – gets a letter saying $20 is not tax deductible

Donor B: $150 donation with FMV of $30 – gets a letter saying $30 is not tax deductible

Donor C: $100 donation + additional $150 donation = FMV of $50- first letter says $20 is not tax deductible, second letter says $50 is not tax deductible for their increased membership level

Though the auditors don’t see a major problem with this method, they did mention that they have some concern that the second letter does not state something to the effect, “Your additional gift has an increased FMV of $10. Your revised FMV is $30.  Please disregard any previously estimated values” or “This FMV replaces any previously provided estimated value.”  They understand how tedious this could be, but have noted it as an area of improvement.  We’re still trying to figure out the best way to handle this situation.

That may be more information than you bargained for, but I hope it helps!!

Best,

Amber