What are the donation acknowledgment requirements for private foundations?

A private foundation that receives a donation of $250 or more from an individual or legal entity (e.g., a corporation) must provide written acknowledgement to the donor. The written acknowledgment or “thank you letter”, can be used by the donor to substantiate a charitable contribution deduction on their income tax return. CPA KPA provides a cash donation template and a stock donation template for you to modify to suit your needs on our accounting forms page. The written acknowledgment, which can be in the form of an email, should contain the following information:

• Name of the foundation

• Date of the contribution

• If cash: Amount of the contribution

• If publicly traded security: Security description, number of shares/units

• If other non-cash: Description of the contributed property in sufficient reasonable detail

• Statement on whether goods or services were received in exchange for the contribution. If yes, a description and good faith estimate of the value of the goods or services.

In cases in which the foundation receives a donated public security, the foundation takes over the cost basis of the donor so the foundation should have a procedure in place to verify cost basis of the donated security.

In cases in which the value of donated property (other than cash and publicly traded securities) is $5,000 or more, the donor may ask the private foundation to sign Form 8283, Noncash Charitable Contributions, for its inclusion with the donor’s tax return. Generally, if the donated property is sold within three years of the donation, the foundation must complete and file Form 8282, Donee Information Return. There are additional reporting requirements for the donation of vehicles and certain other types of property that are beyond the scope of this article.

The IRS has the power to impose penalties on private foundations that do not meet these written disclosure requirements. Generally, the penalty is limited to $10 per contribution, not to exceed $5,000 per fundraising event.

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