Have you ever given a donor a refund of their donation? Maybe a few months after the donation was made the donor realized they gave an incorrect amount or decided that the organization’s administrative expenses were too high. Regardless of the reason, without an express restriction on the donation or a specific clause that allows the donor to get their money back (which may not technically be a current tax-deductible gift), donors cannot get their money back! Although it might seem like the right thing to do, it’s actually a private benefit issue. Charitable organizations cannot directly benefit a private party since charitable assets must be used for charitable purposes. Giving money to a donor, even if it’s designated as a refund, can easily be considered a misuse of funds by the IRS.
