11 Apr In-Kind Contributions Need Systems, Too
For most land trusts, getting stuff for free often means the difference between having what you need and not. Donations of furniture, office equipment, vehicles, printing, and services (especially legal and accounting) can be a Godsend. They can also make life difficult in some unforeseen ways. You should have a system in place for cultivating, soliciting, and acknowledging such “non-cash” gifts. For new organizations, getting started on the right foot is important. For more established organizations, a systems tune-up might help.
Here are several things to keep in mind:
- You are much more likely to get what you need if you ask for it than if you wait for it to be offered. Donors who offer stuff tend to give away things they are getting rid of anyway. Maybe its stuff you need, maybe not. In some cases, it might even cost you (time and/or money) to accept the gift. (Remember that just because a gift is offered doesn’t mean you have to accept it.) On the other hand, if you need a pickup truck or a file cabinet, someone out there might have one to spare.
- Newsletter wish lists are fairly common ways to ask for what you need, but you can take a more direct route as well. Ask for coffee and meeting food from a local grocer, stewardship tools from a local home improvement store, or gift cards from any number of local vendors. I also suggest that you list the value of the item in parentheses when you do ask – someone might just give you $500 so you can go buy that printer you need.
- Many large businesses have in-house services that you could sit in on such as computer training classes, or support systems that you could access such as printing. Time management, staff supervision, and computer program training are often offered by companies “in-house”; some might not mind if you sat in on them to hone your own skills. I live close to a large insurance company that prints several newsletters for community non-profits and an HMO that makes its IT staff available for limited telephone consultation. Such possibilities cost the company very little to give and might be available for the asking.
- You should ALWAYS acknowledge tangible in-kind gifts in writing just as you would a cash gift. In your acknowledgement letter, be specific about what was given: for example, an IBM Thinkpad laptop computer, or a Steelcase filing cabinet. And don’t forget the IRS disclosure statement!
- You should NOT help the donor establish value by including an estimated value in the acknowledgement letter. I don’t even recommend that you enter estimated values with in-kind gifts in your donor software programs. The value of a donated asset is used by the donor as a tax-deduction and is between the donor and the IRS. An appraisal (secured by the donor prior to the date of the gift) can be used to determine value. In fact, as a courtesy, you might ask if the donor wishes to secure such an appraisal prior to making the gift.
- Donations of services are a different story. In-kind donations of services are rarely tax-deductible, and it doesn’t matter what the billable hours might be worth. To claim a tax-deduction for work done, you must have been paid for that work in the first place.
- In the absence of donated services, you might be paying for them anyway – legal and accounting work are two examples. If you accept these services as in-kind gifts it creates two problems. The donor cannot be recognized for the gift they are legitimately making (see the previous bullet point) and the donated time is masking what it really costs to conduct the land trust business.
- In such cases, I recommend that land trusts budget for the expenses and accept the service as an offsetting donation. This can be accomplished easily in your accounting software, but sometimes it is cleaner and clearer to go ahead and pay for the services you use and encourage the donor to make a tax-deductible contribution just like everyone else.
- In most cases, I do not recommend treating donations of time the same as donations of money. Have a special way to acknowledge volunteers – all volunteers: a recognition dinner perhaps, or a special card mailed out at Thanksgiving and signed by the entire Board. But volunteers (including Board members) shouldn’t be recognized as members of your $1,000 giving club by donating time.
- In-kind gifts of goods and services would be a worthwhile discussion at a board meeting. Talk about the various points made here and see what questions come up. Make some decisions about the circumstances under which you might say Yes or No to an offer. Think through the things you might need and how you might go about asking for them. Write down your decisions and periodically review them.
Please note that I am not an attorney. Nothing I have written here, or in any part of this blog, is intended to provide legal advice. I always recommend that donors seek advice from a qualified tax advisor, and you should, too.
Most of this week’s post was originally published in September of 2009.
Photo by Andrew Small courtesy of Stocksnap.io.
Fall Appeal First Drop – (And Some Thoughts About Acknowledging In-Kind Contributions)
David AllenPosted at 20:29h, 11 April
From my In-Box this morning:
A good post, David.
Have you ever posted on donations of land or land value?
Just the reminder that this, too, needs a unique system or at least VERY close attention before you close the donation, so as to make sure the landowner can fully claim their deduction. That would be true of land trusts as well as other nonprofits – but especially land trusts should be ready for this!