Your Nonprofit Should Have a Gift Acceptance Policy

To avoid issues with donors and problems with the IRS, your nonprofit should have a gift acceptance policy.

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If a donor offers your nonprofit ownership of a time-share in Cancun, should you accept it? What about a house that's in foreclosure, a conservation easement, or a deer-head hunting trophy?

From a nonprofit's point of view, there is nothing better than a cash donation. However, many donors like to give nonprofits property instead of cash. It enables them to get rid of unwanted property and get a tax deduction for it. Moreover, many donors attempt to profit from property donations by grossly overestimating their value. Abuses have grown so bad that tough new valuation rules have been adopted in recent years. As a result, IRS rules for property donations are more complicated than the rules for cash contributions.

Property donations can be more trouble than they are worth—for example, where an item has little or no value or is hard to resell. You also need to consider the costs involved in accepting, processing, and selling property donations. Your nonprofit never has to accept an offer of a property donation. Indeed, many nonprofits refuse to accept property donations, except for publicly traded stock. If you don’t want to get involved with property donations, you can always ask donors to sell the property themselves and give you the cash. This is easy to do these days through websites such as eBay and Craigslist.

Your nonprofit should decide whether it wants to accept property donations, and, if so, what type, before they are offered by donors. The best way to do this is to adopt a formal written gift acceptance policy--a document explaining which types of gifts will and will not be accepted by your nonprofit, and describing any special acceptance procedures for certain types of gifts such as real estate. This may seem like overkill for a very small nonprofit, but is an excellent idea for most others.

You can find many examples of gift acceptance policies on nonprofit websites. Take a look at several policies. They aren't all the same. What yours should include depends on your nonprofit's particular circumstances--for example, whether you have the expertise and desire to deal with hard-to-sell items like nonpublicly traded stock, or unusual or specialized items such as vacation timeshares.

By the way, if your nonprofit files IRS Form 990 with the IRS each year, one of the questions you have to answer if your file Schedule M (Non-Cash Contributions) is whether your nonprofit has a gift acceptance policy. Schedule M must be filed if your nonprofit: (1) received more than $25,000 in non-cash contributions; or (2) received contributions of art, historical treasures, or similar assets, or qualified conservation contributions.

May 2013

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