Charities often rely on donations to carry out their exempt purpose. So, it makes sense that any gift is appreciated and welcome, right? Not necessarily. Philanthropic community members and the charitable organizations they aim to support don’t always view gifts the same way.
Let’s say an individual who is moving into a retirement facility chooses to donate their former residence to a charitable children’s shelter. The donor’s idea is that the organization can serve more children with additional housing. While it may seem like a nice gesture, what happens if the shelter’s current occupancy is very low and they have no need for additional housing? Or what if the organization has recently made a strategic decision to focus on a different geographic area that is notoriously underserved? For whatever reason, the organization has no use for the gift, but feels obligated to accept the donation for fear of losing the ongoing support of the community member and their family. The organization is now faced with the task of selling the real estate or finding another organization that can use it. Meanwhile, since the property is not being used for charitable purposes, the organization may owe property taxes. If the house needs repairs, the organization must find the funds to make the repairs necessary to sell the house. It can be a long, expensive process that could have been avoided if a gift acceptance policy had been adopted by the charitable organization.
A gift acceptance policy isn’t necessary, but often helps nonprofits politely decline unwanted gifts without damaging the relationship with the donor. Consider how much easier it is to point to a written policy that outlines the types of gifts the organization cannot accept instead of trying to explain to the donor why their gift won’t be useful to the organization.
If your organization does accept high-value non-cash gifts, be sure to consider the required tax reporting. Donors of vehicles and items over $5,000 may need special certification from the charitable organization for tax purposes. It’s important that the charity does not provide a value to the donor. The donor is entirely responsible for valuing their donation. The organization should value the donation for financial and tax reporting purposes, but the acknowledgement letter should provide a description of the gift instead of a dollar amount.
Would your organization benefit from a written gift acceptance policy?
