Substantiation for Employee Contributions
Question: If our corporate foundation accepts contributions from employees, should we provide the contributors with receipts?
Answer: Yes, you should try to acknowledge all contributions and, if the contribution is $250 or more, you must provide a receipt. Corporate foundations organized as public charities frequently receive contributions from a variety of sources and therefore encounter this issue. Traditionally, private corporate foundations rarely received contributions from sources other than the related company. However, the disaster relief efforts over the past year have increased the number of private corporate foundations receiving contributions from employees and others. For this reason, understanding the substantiation requirements may be helpful.
To claim a charitable deduction of $250 or more, a donor—whether an individual or corporate donor—must obtain a written acknowledgment of the contribution from the charity. If the donor does not have this receipt on hand in the event of an IRS audit, the charitable deduction may be denied. The acknowledgment should contain (1) the name of the organization, (2) the amount of cash contribution and/or a description of any noncash contribution, and (3) a statement that no goods or services were provided in return for the contribution or a description and good faith estimate of the value of goods or services provided.
The acknowledgment must be contemporaneous. In other words, the acknowledgment must be received by the donor by whichever comes earlier: the date the donor actually files his or federal tax return, or the due date of the return.
Corporate foundations, particularly those organized as public charities, may also engage in fundraising activities such as golf tournaments in which donors receive goods and/or services (such as a round of golf or a meal) in return for their contribution. In these cases, a foundation is required to provide an acknowledgment if the donor’s contribution is greater than $75. This acknowledgment should set out the name of the organization, the amount of the donation, and the value of the goods and services received by the donor in exchange for the contribution. It should also include a statement noting that federal law limits an individual or corporate donor’s charitable deduction to the amount by which a contribution exceeds the fair market value of goods and services received in connection with the payment.
