Quid Pro Quo Donations: The $75 Disclosure Rule

If a donor pays your nonprofit more than $75 and receives goods or services in return, you must give them a written disclosure statement. The statement has to say two things: the deductible part of the gift is limited to the amount above the fair market value of what they received, and what your good faith estimate of that value is. Miss it and the IRS penalty is $10 per contribution, capped at $5,000 per fundraising event or mailing.

That's the whole rule. The details are where organizations slip, so here they are.

What counts as a quid pro quo contribution

A quid pro quo contribution is a payment that is partly a gift and partly a purchase. The donor gives money and gets something of value back. The classic cases:

• A $150 gala ticket that includes dinner
• A $500 winning bid on an auction item worth $300
• A $100 donation that comes with a branded tote bag and tickets to a screening The $75 threshold applies to the total payment, not to the part that's deductible. A $100 payment for a $20 item triggers the rule, even though $80 is a gift. The IRS substantiation page puts it this way: a charity must provide a written disclosure statement to donors of a quid pro quo contribution in excess of $75.

What the disclosure statement must say

Two required pieces, per the IRS:

1. A notice about the deduction. The amount of the contribution that's deductible for federal income tax purposes is limited to the excess of the money (and the value of any property other than money) the donor contributed over the fair market value of the goods or services you provided.
2. A good faith estimate of the fair market value of what the donor received. There's no required format. A sentence on the ticket, the invitation, or the receipt works. A worked example, with made-up numbers: a donor pays $150 for a gala dinner you estimate is worth $60. Your statement says the deductible amount is limited to $90, and that the dinner's estimated value is $60.

You can use any reasonable method to estimate value, as long as you apply it in good faith. The IRS gives an example of a $100 tennis lesson, valued at what comparable lessons cost.

When to send it

In connection with either the solicitation or the receipt of the payment. If the disclosure was part of the invitation or the donation form, you don't need to send a second one when the money arrives. Most organizations put it on the ticket page and the confirmation email, so it's covered both ways.

The exceptions

You don't owe a disclosure statement when:

• The benefit has insubstantial value. The IRS points to Revenue Procedures 90-12 and 92-49 for the definition and the inflation-adjusted dollar limits. Check the current figures before you rely on "token item" thinking.
• There's no donative element. A museum gift shop sale is a purchase, not a gift.
• The only benefit is an intangible religious benefit from an organization formed exclusively for religious purposes.
• It's a membership payment of $75 or less per year and the donor gets only annual membership benefits, such as free admission, discounts, or member-only events within the low-cost article limits.

Don't confuse it with the $250 acknowledgment

Two different rules, often blended together. The quid pro quo disclosure applies to payments over $75 where the donor gets something back. The written acknowledgment applies when a donor wants to claim a deduction of $250 or more for a single gift.

The acknowledgment must state whether you provided any goods or services in exchange. If you did, it must include a good faith estimate of their value. A single document can do both jobs, which is why many nonprofits fold the disclosure into the donor's receipt.

One responsibility split worth knowing: the IRS says the donor is responsible for requesting and obtaining the written acknowledgment. The disclosure statement is on you. Your donors shouldn't have to ask for it.

What about donated goods?

Noncash gifts follow their own rules, including the acknowledgment and, for larger gifts, Form 8283 on the donor's side. IRS Publication 1771 covers the acknowledgment requirements in full. Quid pro quo enters the picture only when the donor gets something back for the gift, say a table sponsorship that includes seats at your dinner.

For a nonprofit using a wishlist, the quid pro quo question is usually simple. On Givelink, a donor funds a specific item you asked for, and what comes back is a thank-you and a photo of the delivery, not goods or services with a market value. Nothing there for you to value, which keeps the paperwork light. Confirm how it applies to your situation with your CPA.

A short checklist for your next event

• Price every ticket with the value of the meal, entertainment, or gift in mind.
• Put the deductible amount and the estimated value on the ticket or invitation.
• Repeat both numbers in the confirmation email.
• For auctions, record the winning bid and your estimate of the item's value, so you can state the difference.
• Keep a copy of what you sent.

Frequently asked questions

Is the disclosure statement required for every gala ticket? For any ticket priced over $75 where the donor receives a meal, entertainment, or other benefit of more than insubstantial value, yes. The statement can sit on the ticket, invitation, or confirmation.

What's the penalty for not providing one? $10 per contribution, up to $5,000 per fundraising event or mailing. The IRS allows relief if the failure was due to reasonable cause.

Does a thank-you gift trigger the rule? Only if the gift is more than insubstantial value and the payment is over $75. Small items such as a sticker or a pen generally fall under the insubstantial-value exception, but check the current Revenue Procedure limits.

Do we have to send it to donors who give less than $75? Not under the quid pro quo rule. Separate rules apply if a donor wants to claim $250 or more.

Next step

Pull your last event's ticket page and read it against the two required elements. If either is missing, fix the template now, before the next mailing. Want to see how a wishlist keeps donor paperwork simple? Browse the live directory or start a nonprofit profile.

This is general information, not tax or legal advice. Talk to your CPA or counsel about your situation.