Not-For-Profit Accounting

Here are even more nonprofit accounting and financial questions that have come to from this site and from my workshops and my answers.

Question – California’s RRF-1

Are there any income minimums for filling out the California Attorney General’s Registration / Renewal Fee Report (RRF-1 form)?

Answer – No, but the fees charged vary based on the organization overall income.

Question – Donation Transactions

Let’s say Joe buys a necklace for $1,000.00. He gives it to a nonprofit to sell at auction. Two questions:

1. It sells for $1,200.00 – what year end donation value does Joe get on his year end donation statement.
2. It sells for $800.00 – what year end donation value does Joe get on his year end statement for IRS.

Also, if it sells for $1,200.00 what donation value does the purchaser get on her year end tax statement? My concern is who to give the donation credit to for year end tax purposes.

If someone gives a basketball that a sports star signs and the basketball cost $10.00. Yet someone is a real fan of the sports star and is willing to purchase the basketball for $1,000,000.00 – does the purchaser not receive any donation value for income tax purposes, he gets no statement at the end of the year, even though he gave $1,000,000.00 for a $10.00 basketball? And the person who bought a $10.00 ball and had a signature put on it gets a year end tax donation statement for 1,000,000.00?

I have read GAAP until I am blue in the face and cannot find an answer to the donation side of this issue. Lots on the bookkeeping of the sold asset, but not on what to report to IRS as donation value per donor and purchaser.

Answer -In your example above, for the person who gave the ball to be auctioned you do not put a value on the donor acknowledgment. It is not the nonprofit’s job to give tax advice to the donor, and by giving them a value that is what you are doing. Just simply say, “Thank you for the donation of the autographed basket ball.” What the donor values it on their tax form is between them and the IRS.

For the person who pays $1,000,000.00 for the ball you would give them a receipt showing that they donated $1,000,000.00 to the nonprofit less the cost of a basket ball. If you can find a value for a similarly signed ball, say on Ebay or something, you could tell them the value is their donation less the cost of the autographed ball.

Donation rules tend to be made by the IRS rules and not come from GAAP rules. A really good resources for this is IRS publication 1771. Gives you the rules and even sample language. Please check out this post, it also help answer your questions.