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 "token" items.

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 gift of $75 or more and receives something in return. This letter (which can take the form of a regular thank-your letter) should state the fair market value of any gifts or rewards sent to the donor. (For example, radio stations commonly send books, DVDs, and other gifts to those who pledge support.)

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 itemize their deductions).

However, as a nonprofit you should also know that there's no need to tell donors to subtract out the value of return gifts in two situations:

  1. the gifts were merely "token" 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 2019 inflation adjustments regarding quid pro quo contributions, to qualify as token goods or services, they must cost your organization no more than $11.10 to produce, they must bear your organization's name or logo, and the contribution received must have been at least $55.50. (Things like tote bags, coffee cups, or stickers are typical "token" items.)

Regarding the exception for low-cost items, these must now either have a fair market value of $111 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 201-; these are regularly adjusted. See IRS Publication 1771, Charitable Contributions Substantiation and Disclosure Requirements, for more information.