IRS quid pro quo rules and Option B receipts
Updated
A quid pro quo contribution is a payment a donor makes partly as a contribution and partly for goods or services. This page sets out the IRS rules and what an Option B receipt from FreeCharityReceipts prints. The rules are the IRS's: Charitable contributions: Quid pro quo contributions (opens in a new tab) and Publication 1771 (opens in a new tab).
This page is not tax or legal advice. What counts as goods or services, and what it is worth, is your call as the charity. Check the IRS pages or ask a professional.
The $75 rule
The IRS says a charity must give the donor a written disclosure statement when the donor's payment is more than $75 and is partly a contribution and partly for goods or services. The IRS example: a donor gives $100 and gets a concert ticket valued at $40. The deductible part is $60, and because the payment is more than $75, a statement is required even though the deductible part isn't more than $75.
The statement must:
- Tell the donor that the amount deductible for federal income tax purposes is limited to the excess of the money (and the value of property other than money) the donor contributed over the fair market value of the goods or services the charity provided.
- Give the donor a good faith estimate of the fair market value of the goods or services. The IRS says a charity may use any reasonable method, applied in good faith, and may use comparable goods or services where the actual ones aren't sold commercially.
The charity must furnish it in connection with either the solicitation or the receipt of the payment. If it was given with a particular solicitation, another one isn't needed when the payment arrives. Publication 1771 adds that the statement must be in writing and made in a manner likely to come to the donor's attention. It says a disclosure in small print within a larger document might not meet that.
When no statement is required
The IRS says no disclosure statement is required if any of these is true:
- The goods or services have insubstantial value as described in Revenue Procedures 90-12 and 92-49.
- There is no donative element in the transaction, for example a visitor's purchase from a museum gift shop.
- Only an intangible religious benefit is provided, by an organization organized exclusively for religious purposes, of a type that generally isn't sold in a commercial transaction outside the donative context. Payments for tuition for education leading to a recognized degree, travel services or consumer goods are not covered.
- The donor pays $75 or less per year and receives only annual membership benefits that consist of rights or privileges the donor can use often during the membership period (other than the right to buy tickets for college athletic events), or admission to member-only events within the IRS low-cost limits.
The penalty
The IRS says the penalty for failing to make a required disclosure is $10 per contribution, up to $5,000 per fundraising event or mailing. The charity can avoid it by showing the failure was due to reasonable cause.
Option B on FreeCharityReceipts
Option B is the second IRS Acknowledgment Statement on the form. It needs a signed-in account and costs 2 credits, or is covered by a pass. See Option B receipts for the steps.
| What | On the receipt |
|---|---|
| Total paid | Gift Amount ($) prints as the amount. |
| Your estimate | The value you enter prints as Goods/Services: and in the footer statement. FreeCharityReceipts doesn't check it. |
| Description | The Goods or services provided (description) you enter (required, up to 100 characters) prints in the footer statement. |
| Deductible amount | Tax-Deductible: is the gift amount minus your estimate, and never below $0.00. |
| Statement | "Goods or services were provided in exchange for this contribution:" your description, "We estimate their fair market value at" your amount, then: "The amount of your contribution that is deductible for federal income tax purposes is limited to the excess of your payment over this value." |
The statement covers the two points the IRS lists: the deductibility limit and an estimate. Note:
- Description and estimate. The IRS acknowledgment rules call for a description and a good faith estimate. The form requires both, and the receipt prints both. See What an IRS written acknowledgment must contain.
- Small type. The statement prints in the receipt footer in 7.5 point type. Publication 1771 says a disclosure in small print within a larger document might not meet the requirement.
The form doesn't decide for you. You choose the statement on each receipt, so you decide when Option B applies and whether one of the exceptions above does.
On Bulk paste, each row's own statement is the one that prints. The page default applies to every row you haven't set by hand, and each Option B row needs a description. See Paste rows for bulk receipts.
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