What Constitutes a Quid Pro Quo or Token Gift for Charitable Contributions?

If you've read Nolo's nonprofit books, you know that when thanking donors for gifts to your nonprofit, theres no need to subtract out the value of insubstantial or low-cost items. Here's are the 2022 figures on what qualifies.

By , J.D.

As readers of Nolo's books on nonprofit fundraising and management know, nonprofits need to send a written disclosure to anyone who makes a single charitable gift of $75 or more and who receives something in return. For example, radio stations commonly send books, DVDs, and other gifts to those who pledge support.

This acknowledgment letter (which can take the form of a regular thank-your letter or an email) should state the fair market value of any gifts or rewards the nonprofit sent to the donor.

Why Do Nonprofits Need to Advise Donors of the Thank-You Gift's Value?

Giving donors a heads-up regarding the market value of their donations will be crucial when they fill out their annual income tax returns. The donors will need to subtract the amount of the gift from the amount of their donation before taking a charitable tax deduction (assuming they're among the wealthy few who currently itemize their deductions).

What Exceptions Can a Nonprofit Use to Avoid Advising Donors of the Fair Market Value?

There's no need for a nonprofit organization to tell donors to subtract out the value of return gifts in two situations:

  1. the gifts were merely token, "insubstantial" items, or
  2. the gifts were low-cost in comparison to the overall donation.

The exact dollar amounts of what constitutes "token" or "low-cost," however, change year by year.

According to the IRS's 2022 inflation adjustments regarding quid pro quo contributions, to qualify as insubstantial goods or services, they must cost your organization no more than $11.70 to produce, they must bear your organization's name or logo, and the contribution received must have been at least $58.50. (Things like tote bags, coffee cups, or stickers are typical such items.)

Regarding the exception for low-cost items, these must now either have a fair market value of $117 or less or be worth 2% or less of the donor's payment, whichever is less.

The above token and low-cost limits apply to calendar year 2021; these are regularly adjusted. See IRS Publication 1771, Charitable Contributions Substantiation and Disclosure Requirements, for more information.