Preparing 2018 Tax Statements Under New Tax Law

tax law, tax statements, Membership, General Management, calendar year-end

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Sending gift receipts to donors is an end-of-year obligation for all stations. Embedded in this task is also the tremendous opportunity to thank your major, mid-level, and sustaining donors for a year of support.

Of course, there’s been a significant change to tax law since you last mailed your year-end statements. However, the Tax Cuts and Jobs Act of 2017 made no significant changes that should impact the compliance component of the tax statements provided to donors.

Compliance isn’t the only concern. We haven’t been able to predict how changes in the standard deduction requirements will affect overall charitable giving. Tax experts and fundraisers alike are watching this unfold. Therefore, it’s even more critical to communicate to donors that they are public radio’s largest and most important source of funding. This message is important year-round, but should be the foundation of your 2018 year-end communication with donors.

As you prepare your 2018 year-end correspondence, here’s what to keep in mind.

Review the Rules

Review the IRS Guide for Charitable Contributions: Substantiation and Disclosure Requirements (Publication 1771). It’s important to take a look before you get started so you’re up to speed. Publication 1771 was last updated 03/2016.

Watch a webinar on how tax law changes can affect your donors >>

Here’s the top-line data for 2018:

  1. Donors are responsible for maintaining in their records a bank record or written communication for donations of less than $250 and a written acknowledgement from the donee for donations of $250 or more that they intend to claim a deduction for on their tax return.

  2. Your station or organization is responsible for providing written disclosure to donors who receive goods or services in exchange for a single donation of $75 or more.

    • There is a “Token Exception” for “insubstantial goods or services” (such as a thank you gift). To be deemed insubstantial, the Fair Market Value can not exceed the lesser of 2% of the payment or $109; or...

    • Meets the following criteria: The donation is at least $54.50, and the thank-you gift bears your station’s name and/or logo and is valued at no more than $10.90.

Your station is required to provide a written disclosure or receipt for donations of $75 or more that are partly for goods or services and partly for a donation. (The IRS uses concert tickets as an example.) This is referred to as a “Quid Pro Quo” contribution.

To review these details, See IRS Memo RP-17-58 - Page 18-19, section .30

What information should you include on a tax statement? According to IRS Guide for Charitable Contributions: Substantiation and Disclosure Requirements, the IRS requires the following information:

1. The name of organization

2. The amount of cash contribution

3. A description (but not the value) of non-cash contribution

4. A statement that no goods or services were provided by the organization in return for the contribution, if that was the case; or a description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution.

Other details from the IRS

  • A separate acknowledgment may be provided for each single contribution of $250 or more, or one acknowledgment, such as an annual summary, may be used to substantiate several single contributions of $250 or more.

  • There are no IRS forms for the acknowledgment. Letters, postcards or computer-generated forms with the above information are acceptable.

  • An organization can provide either a paper copy of the acknowledgment to the donor, or an organization can provide the acknowledgment electronically, such as via an email addressed to the donor.

And, of course, you should consult with your tax preparer or counsel before instituting these recommendations. It’s become more difficult to locate this information in IRS memos and briefs than in previous years.

Sustainers

Sending sustaining donors a tax statement is a great idea, regardless of whether they received goods or services or made one or more $250 one-time donation. It helps summarize their support in one easy-to-use document and is another touchpoint to thank them for their commitment to your station.

This can be a big task if sustainers make up the majority of your membership. Stations often send tax statements to sustainers via email, or give donors the ability to download tax statements themselves from a member portal.

You can also work with a mail house to generate the copy for each specific donor and  their premium permutation. Greater Public’s direct mail collaborative is an example of one such mail house.

To ask or not to ask? Do you solicit a gift with your tax statements?

In a quick survey of stations, most said they do not solicit a gift in a tax statement. Of those who did, most often it was done as an upgrade request to sustaining members, or a business reply envelope was included without any formal request. We recommend using tax statements primarily as a valuable stewardship opportunity to connect with and thank donors for their support.

GSB:9797071.2

Watch a webinar on how tax law changes can affect your donors >>

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