Regulations for 501(c)(3) Donations

By Elizabeth Rayne

One of the main benefits of creating a 501(c)(3) nonprofit organization is the ability to accept tax-deductible donations. The IRS designation 501(c)(3) indicates that the nonprofit is exempt from federal tax. However, in order to stay exempt and ensure donors can deduct their donations, it is essential to follow the IRS rules for written disclosures, record-keeping and annual reports.

Donation Receipts

If a donation is over $250 and the donor did not receive anything in return from the nonprofit, the donor may only report the contribution on his taxes if the nonprofit provides the donor with a receipt, known as a written disclosure. The disclosure must include the name of the organization, the amount of the donation, and whether any goods or services were given in exchange for the donation.

Quid Pro Quo & Non-Cash Donations

If the nonprofit gave anything in exchange for a donation, the donor must have a written disclosure for any donations over $75. The donor will only be allowed to report the donation for the amount over the value of the goods or services received. In other words, if a donor gave $100, but received a free massage worth $50, she may only report a $50 donation on her taxes. Nonprofit 501(c)(3) organizations may accept both cash and non-cash donations, such as clothing or household goods. To report the donation on a tax return, the donor must receive a written disclosure from the nonprofit. However, volunteer time is not tax deductible.

Ready to form a nonprofit? Get Started Now

Record Keeping

In order to properly prepare for filing informational returns with the IRS, 501(c)(3) organizations must maintain records of the donations received, including the names of the donors and the amount of donations. Further, nonprofits must separate taxable from non-taxable income, meaning that 501(c)(3) organizations must have the ability to track the source of all their income. If the organization solicited donations or organized fundraising events, the IRS recommends that the organization keep records of advertising and other fundraising material used to promote donations or events. For example, the nonprofit should keep records of emails sent to potential donors, and advertising copies for events.

Annual Return

All 501(c)(3) public charities must file an annual informational return with the IRS. Depending on the size of the organization's budget, the nonprofit must file either form 990, 990-EZ, or 990-N. For nonprofits with larger budgets that file forms 990 or 990-EZ, the return must include Schedule A, which provides the amount of donations received by the nonprofit. If the organization received more than $5,000 in donations from a single contributor, it likely will file Schedule B, which lists the names of all the contributors.

Ready to form a nonprofit? Get Started Now
Non-Profit Requirements for Non-Cash Donations


Related articles

Requirements to Maintain 501C3 Status

More than 100 501(c)(3) organizations lose their exempt status every year, according to the Nonprofit Risk Management Center. The Internal Revenue Code section 501(c)(3) is a provision in the federal tax code, which allows certain nonprofit organizations, including charities, churches, educational institutions and other organizations that meet the requirements to be exempt from certain taxes. The IRS regulates and regularly reviews exempt organizations to ensure that they are following the regulations and that the organization continues to do the work that led to its exempt status. Failing to follow the guidelines can lead to fines and, in some cases, the loss of 501(c)(3) status.

Non-Profit Fundraising in the State of Florida

The life of a nonprofit hinges on its ability to collect donations. In Florida, most nonprofits are subject to specific reporting and filing requirements. Further, additional reporting and tax implications come into play if the organization has been deemed exempt from federal income taxes. Knowing which organizations are subject to the reporting laws, as well as understanding what activities constitute solicitation, will help ensure the success of your nonprofit.

Rules & Regulations for Non Profit Foundations

Nonprofit foundations that meet certain requirements are eligible for special tax treatment by the IRS under Section 501(c)(3) of the Internal Revenue Code. Donors to such organizations enjoy tax benefits as well. Most nonprofit organizations must apply for 510(c)(3) status before taking advantage of its benefits. Under certain circumstances, however, the IRS may revoke a nonprofit foundation's status.

Doing the right thing has never been easier. Nonprofit

Related articles

Non Profit Donation Rules

Nonprofits are businesses organized for a purpose other than generating profit. For that reason, the survival of a ...

How to Donate Self Storage Space to 501C3 Nonprofits

Contributions to 501(c)(3) organizations are tax-deductible for individuals and businesses. You can reduce your ...

How to Accept Property Donated to a 501(c)3

The Internal Revenue Service has strict rules governing donations of non-cash property to tax-exempt nonprofit ...

How do I Accept Donations on a Pending 501(c)(3)?

Although not required to operate, obtaining federal 501(c)(3) tax status allows nonprofit organizations to accept ...

Browse by category
Ready to Begin? GET STARTED