In-kind Donations

An in-kind gift consists of goods or services that are provided by the donor. Churches can benefit greatly from such donations. In general, the documentation requirements are directed more at donors that recipients and are covered in IRS Publication 561, determining the value of donated property. There are specific requirements for donated artwork and tangible goods with value over $5,000. Securities donations have specialized rules and are not included in this tax tip.

There are some relevant tax requirements that must be met:

The recipient organization should provide a receipt for tangible gifts that includes a detailed description of the gift but not a stated value. The receipt should state clearly that “valuation of the gift is the responsibility of the donor.”

Generally, donors cannot deduct the value of donated services, so receipting necessary for donated services would be a description of the service, including the time provided.

It is a good idea to maintain an internal record of in-kind donations that includes:

• The date of the gift
• Detailed description of the gift
• Donor name and address
• Approximate value of the gift and how it was calculated

The organization should record gift income for the actual fair market value of donated property.

Income for contributed services can be recorded if:

• The services create or preserve non-financial assets
• Require specialized skills and are being performed by people who possess those skills
• Would need to be purchased if the services were not donated

As a practical matter, organizations can maximize the impact of in-kind donations by establishing a program to manage such donations

First, figure out your needs:

If particular items are needed, such as office supplies, those could be communicated to potential donor companies. You could also pursue stores to see if they are willing to provide a means of fulfilling your organization’s “wish list.”

Many large organizations have established programs to donate supplies and goods. Service vendors might be willing to provide services in return for a public thank you.

Next, establish a prior approval process, particularly for tangible gifts. Organizations frequently receive donations that they cannot use or sell. That portrait of Cousin Elmer might have sentimental value, but maybe your church does not need a wing devoted to family art.

Finally, include a process described above to record the value of the gift and to thank the donor.

_{Administration Matters January 2010}