General Discussion

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Legal question on insubstantial gift benefits

We’d like to clarify the IRS guidelines around insubstantial benefits, as outlined in Revenue Procedure 90-12, 19901 C.B. 471. Our understanding of those guidelines follows:

The benefits can be considered insubstantial if BOTH of the following occur:

There’s an ongoing fundraising campaign, and the nonprofit EITHER:
States how much of the contribution is tax deductible in the request materials and/or receipts for the gifts
OR the nonprofit sought a ruling from the service approving an alternative procedure
One of the three following conditions are met:
The value of all benefits received is not more than 2% of the payment, or $109 (for 2018), whichever is less
OR the only benefits are token items bearing the organization’s name and/or logo
OR the nonprofit distributes free, unordered items to patrons, with a statement that the patron may retain the item whether or not they make a contribution

Our primary question, assuming that understanding is correct, is whether tickets to events are included in section 2a above. If the donor were receiving admission to an event, or a table at an event, and the cost of the ticket/table would be less than 2% of the payment, or less than $109 – would it be allowable as an insubstantial benefit? Is it dependent on whether the cost to the organization of an individual attendee is within the “low cost articles” limit?

Our second question is regarding the membership benefits exception. Our understanding is that an annual membership benefit (including free or discounted admissions to the organization’s facilities or events, as well as free or discounted admission to member-only events where the per-person cost is within the low cost articles limit) is considered to be insubstantial if the annual payment is $75 or less. Is that correct?

Kaela Hammond

Program Associate & Compliance Manager

Coastal Community Foundation of SC

635 Rutledge Avenue, Suite 201, Charleston, SC 29403

Phone: 843-723-3635 ~ Fax: 843-577-3671