In-Kind Contributions – Caution Needed for Donors and Charities

Donations of household items, collectibles and other personal property by individuals represent an important source of philanthropic support for many operating public charities. In-kind contributions may provide both a revenue stream and assets used to advance the recipient charity’s mission. Following is a high-level discussion of a few key considerations for individual donors who make in-kind contributions and the operating charities that receive them.

Individual Donors

• The donor generally is responsible for determining the fair market value of the item donated for his or her tax purposes. An IRS-qualified appraisal is required for in-kind contributions (other than publicly traded securities) valued in excess of $5,000.
• The donor must complete and file IRS Form 8283 when the amount of his or her deduction for all noncash gifts is more than $500 for the year. For contributions valued in excess of $5,000, IRS Form 8283 includes the declaration of the qualified appraiser, as well as a certification by the recipient organization that it will file IRS Form 8282 if it disposes of the item within three years of receipt.

Recipient Charities

• When accepting in-kind contributions, the recipient charity first must take care to ensure compliance with its gift acceptance policy.
• The organization may not provide the donor with a value for the donated item in the gift acknowledgement (i.e., “tax-receipt”) letter or otherwise. It is the responsibility of the donor to value the donated item for his or her tax purposes. The gift acknowledgement letter should describe the item donated. One important exception to this rule is for contributions of publicly traded securities. The organization may include in the gift acknowledgement letter the mean (average) of the highest and lowest quoted selling price on the date the securities were transferred to the organization.
• The organization must value the in-kind donation, however, for required disclosures in its own financial statements and on IRS Form 990.
• This value determined by the recipient charity for accounting purposes also may be used to recognize in-kind donors in its annual report or other honor rolls.
• The organization must file Form 8282 with the IRS (and provide a copy to the donor) in the event that the organization sells, exchanges, or otherwise disposes within three years after the date of receipt of donated property for which the donor claims a value of $5,000 or more on his or her Form 8283. The organization is not required to file Form 8282 (i) for publicly traded securities, (ii) if the property is valued at $500 or less, or (iii) if the property is distributed for charitable purposes. The amount received by the organization upon disposition of the property must be disclosed on IRS Form 8282.

A number of important issues related to in-kind contributions are beyond the scope of this memorandum including, without limitation, contributions of services, in-kind donations by businesses, as well as considerations related to donations of conservation property, historical facades, taxidermy property, vehicles, inventory and other special assets.