20 Oct Fall Appeal First Drop – (And Some Thoughts About Acknowledging In-Kind Contributions)
OK, so as a practical matter, this is the last week you can drop the first letter of your Fall Appeal if you intend to drop three letters. (I actually prefer that the first letter get dropped in early October.) Mailing this early means that you can get a reminder letter out before Thanksgiving, and if you are inclined to send out a third letter, you will still have time to drop it before Christmas.
I’m not going to rehash how to write appeal letters again here. If you’re starting from the beginning, some helpful links are located at the bottom of the post.
Fundraiser’s Almanac: September
- Handwritten Letters
- Getting the Most from Your Fundraising Events
- Good News
- Filing/Data Entry
- Lapsed Member Letters
Fundraiser’s Almanac – October
Instead, I’d like to share with you some thoughts I offered at The Learning Center in response to this question:
How do we thank someone for their donation when they are donating a home-made dinner for six to eight people via our silent auction?
Judy Anderson fielded the question and asked me to weigh in. (OK so I was flattered.) Our conversation led to the following, excerpted here from The Learning Center.
Just so it gets officially stated up front, I am NOT a tax advisor, and I am NOT an attorney. However, with that critical disclaimer:
My advice is to acknowledge this gift just as you would acknowledge any gift – with a sincere statement of appreciation for what was actually given.
- Thank you very much for your gift of $35.
- Thank you very much for your gift of 25 shares of XYZ stock.
- Thank you very much for donating your 4-wheel-drive truck.
- Thank you very much for volunteering to help us with the mailing last Saturday.
- Thank you for donating a homemade meal for 6-8 people for the auction.
The only caution with in-kind (non-cash) gift acknowledgements is that you should avoid assigning any particular cash value to the gift. Gifts such as land, cars, jewelry, and so on that are accompanied by an appraisal are notable exceptions (and there are special rules for gifts of stock), but generally, just describe what was actually given and leave it at that.
You can make your acknowledgement more personal by sharing with the donor a story about how gifts like theirs really made the event, or how much it means to the land trust that we had such a wonderful array of “gifts from the heart” this year. You might tell them a little about the buyer and how much fun you can imagine them having together. You might also include a photo of the event, especially a photo in which they appear. In this latter case, include an actual photo, instead of simply embedding one in your letter.
If you’re thinking about how the donors should be listed in event publicity, consider it this way. Privately guess at a fair value range for the gift and list the donors in the corresponding “category of sponsors,” again avoiding committing to writing any approximation of the gift’s value.
For example, if each dinner is “about $25, and maybe as high as $50,” 6-8 such dinners might be $150-400 in value. If Gold Sponsors give $1,000, and Silver give $500, then these donors might be listed as a Bronze sponsors.
But there’s a secondary acknowledgement question also: How should you report to the buyer of these dinners how much of their purchase price is deductible?
The matter of how much of the amount the purchaser paid is deductible is somewhat stickier, and again my advice is, and your advice should be, “please consult with your tax attorney.” This one is stickier because there will be some interpretation involved of what is “reasonable.” One could reasonably argue that they paid X, therefore the dinner was worth X (to them) – no tax-deduction. Not very satisfying, is it?
Here’s a better answer. Unless someone paid at least $400 for the 6-8 dinners, it’s probably not tax-deductible at all. And unless someone paid at least $20,000, it’s probably not “insubstantial.” So what is reasonable if they paid $1,000? Or $5,000? I would start with what they might have paid for a similar dinner in a local restaurant – $50 a plate for normal food, and $80 a plate for lobster? Perhaps. (They could do a little research.) Then multiply it out by the number of plates and subtract that amount from their purchase price. The remainder would probably be deductible.
But again, your advice to them should still be – “You should consult with your attorney or tax advisor.”
This is a great example of the conflicts that arise when one tries to apply the same rules to development/fundraising work as one does to accounting. Everything in the above example relates to how the organization communicates with the donor, and especially in writing. Don’t get involved helping donors establish value for their in-kind gifts.
Meanwhile in your other ear, your accountant is demanding that you provide a value for all the in-kind gifts – because accountants are ruled by Generally Accepted Accounting Principles (GAAP). According to GAAP, items given to a non-profit, including service time from a qualified professional, constitute “in-kind revenue” and their aggregate value must be quantified for the Income Statement.
Aaaaaargh! What’s a fundraiser to do?
My advice is to keep all your in-kind gifts on a spreadsheet that is separate from your donor tracking software. Assign a “reasonable” value for each one and give the list to the accountant. But don’t communicate the values to the donors and don’t enter the values in the donor software.
Hopefully, at the end of the year, your donors will be happy, your accountants will be happy, and the IRS will be happy, too.
David Allen (NOT an accountant, NOT an attorney!)
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Photo credit: Aspen Forest by Walt Kaesler.
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