Non-profit Special Events – Is it deductible for tax purposes ?

Special events are an effective way for a non-profit to both raise money and also raise awareness of the organization and its mission in the community. Special events that are well planned and consistent year to year are often very successful. An important aspect, however, is the tax deductibility of purchases or contributions made by the attendees. Often the organization and the attendees incorrectly assume that all purchases of tickets, tables, registrations, auction items, etc., are 100% tax deductible. 

The IRS clearly states that, “If a donor received something of value in return for the contribution, a common occurrence with fund-raising efforts, part or all of the contribution may not be deductible.” 

So what is deductible? The amount that is deductible is actually the amount given over and above the fair market value of the event or purchase. This is where the organization should step in and give some assistance to the attendees. Before the event the organization should determine the fair market value of the event and inform the participants how much of their contribution is deductible and how much is for the goods or services provided at the event. 

For instance, if a golf tournament is held, it would be a good idea to include a phrase on the registration form stating, “of the $250 registration fee, $100 is considered to be the value of participation in the tournament” This clearly informs the donor that the participation in the golf tournament is valued at $100 and the remaining registration fee is considered to be a contribution to the organization. Also, when determining the fair market value of the event, the organization should consider all that is offered to each participant at the event, including meals, entertainment, contests, prizes, etc.  These values should be determined in advance, and a conscious effort should be made by the organization to clearly inform the participants of the split between their payment for services and deductible contributions.

Need additional help?  Contact us.