Donations: A Play in Three Acts
At the end of 2022, our office received some good questions regarding donations. This article is a toe-dip into the vastness of this topic. As such, please consider this general information and not legal advice. Please call our office if you have your own donation scenario you’d like to discuss. Okay, let’s dig in!
The scene: A quiet office. Attorney Connelly calmly reads statutes. Outlook chimes. A new email. She opens it….
To support a community’s unhoused population, a city sponsors a shoe and sock drive. The city requests only new shoes and socks for donations. A community member donates 2 pairs of new men’s shoes and a 10 pack of new men’s socks. Is the city required to provide a receipt to the donor?
This scenario involves what the IRS would call a “noncash donation, value most likely less than $250.” There is no requirement to provide a receipt in this scenario unless the city is providing goods and services in exchange for the donation (a quid pro quo contribution). If you have a quid pro quo situation, call our office and we can walk you through what is required.
Even without a receipt, a donor may satisfy the IRS’s substantiation requirements for a noncash donation, value less than $250 if the donor keeps their own written records for each donated item. So, if the city chooses not to provide a receipt, donors who want to claim a tax deduction can do so using their own records.
If the city wants to provide a receipt, our recommendation is to keep it simple. Donated household goods or clothing are only acceptable to the IRS as a tax deduction if they are in “good used condition” or better. The city should avoid assessing the condition of donated items for purposes of receipts. That would put the city in an awkward position. As explained above, for this category of donation, a blank receipt is probably just as good to a donor as a receipt that lists the items donated but does not include the condition of those items. So, to keep it as simple as possible, the city may choose to provide a receipt that acknowledges that a donation was received by the city and leaves the rest (value and condition) up to the donor.
The scene: Lunch time, finally. Attorney Connelly returns to her office with her snack size bag of baby carrots and portioned out nonfat ranch dressing. Spring break is
coming up after all. Outlook chimes. A new email. She opens it….
A city’s public works department is offered equipment with a donor-provided value of $10,000. The donor asks the city to provide them with documentation that the donor can then use for tax purposes. What are the city’s obligations?
Under IRS rules, units of local government are considered to be qualified organizations that are eligible to receive charitable contributions that are tax deductible. Your
organization may have a policy regarding accepting donations. If so, review and follow that policy.
In the absence of a policy, here are some steps to take: Determine whether the city wants/needs the donation. If not, there is no obligation to accept it. If the city does
want the donation, then start by finding out as much as you can about it before accepting it. Is the equipment titled in the donor’s name (individual name vs. a company name, for instance)? Is the equipment collateral for an outstanding debt? Is the useful life remaining on the equipment less than one year? If any of these issues are present, then I would caution against accepting the donation unless there is a clear path to remedying the issue before you accept the donation. Before accepting a high-value donation, also consider who has the authority to accept the donation on behalf of your organization.
In the scenario above, what does the city have to provide to the donor for tax purposes?
Bottom line: The donor needs to follow the direction provided by their own tax consultant/accountant. That’s because what is really at stake is the success of the donor’s claimed tax deduction. There really is no penalty for the city (in this scenario) if it provides the wrong type of acknowledgement (or none at all) unless goods and services are exchanged for the donation. What the city should watch out for is the usefulness of the equipment to the city’s operations; the title to the equipment; and the way in which the donor plans to transfer title of the equipment to the city.
Our office is available to help if this situation arises in your jurisdiction. Your organization’s accountant or bookkeeper would also be a good resource in this type of situation.
The scene: An LGLG attorney meeting. Discussion of upcoming newsletter articles ensues. Attorneys Williamson and Stone add a tangentially related topic to Attorney Connelly’s donation article. Attorney Connelly’s ears perk up, admittedly she was only halfway listening to the discussion up to that point. Act 3 is born.…
A city councilor is becoming a first-time homebuyer. A community member sets up a Go Fund Me account to help the city councilor with furnishing the new home. Can the city councilor accept donations from the Go Fund Me account?
In case you haven’t heard, Go Fund Me is an online crowdfunding platform wherein an individual may set up an account for a beneficiary in need of money. The Oregon Government Ethics Commission has issued an opinion in a similar situation to the one described above. (Albeit the scenario presented to OGEC was a more worthy cause.)
That opinion provides the following guidelines:
- ORS 244.025 limits how much a public official may accept each calendar year
from a source with a legislative or administrative interest in the matters subject to
the public official’s decisions. The limit is $50 per calendar year.
- The funds collected in the Go Fund Me account would be subject to the $50 per
calendar year limitation if the source has a legislative or administrative interest in
the public official’s work. ORS 244.020(10) defines “legislative or administrative
interest” as an economic interest distinct from that of the general public in any
matter subject to the decision or vote of the public official acting in their official
- To comply with ORS 244.025, the public official would need to see the list of
donors’ names and the amount donated to decide whether or not the public
official may accept the donation. If the public official sees that a $500 donation
has been made by a business owner with a matter pending before the city
council, then the city councilor should not accept that donation. The amount
exceeds $50 and the donor has an economic interest distinct from that of the
general public in a matter subject to the decision or vote of the city councilor.
- Online crowdfunding platforms, such as Go Fund Me, allow anonymous
donations. In that case, a public official would not be able to tell who the
donation came from and should not accept an anonymous donation. If a donor
has no distinct economic interest in the public official’s decisions, then there
would be no limits on the donation amount that the public official could accept
from that source.
- There are nuances to the use and acceptance of donations through online
crowdfunding platforms. If you would like to develop a policy around the use of
online crowdfunding platforms for your city councilors, city employees, etc.,
please give one of us a call to discuss.
The scene: Attorney Connelly packs up after another productive day in the office. She rides the elevator down to the first floor and walks to her car on the top level of the
parking structure. She forgot her car keys….