Short on Cash? Support Charities with Gift-in-Kind Donations

Donations help nonprofit organizations keep running and achieve their mission. While donors can give money or volunteer their time, they can also contribute tangible or intangible goods and services that would otherwise require funding. However, not all donated goods and services hold the same value, and only certain contributions qualify as tax-deductible gifts-in-kind.

Defining Gift-in-Kind

Tangible personal property gifted to a charity is generally considered to be a gift-in-kind. Gifts typically include personal property (clothing, blankets, household items, etc.) donated assets, vehicles, and artwork. Generally, tangible gifts-in-kind are tax-deductible at fair market value.

Intangible property, such as advertising time, copyrights, patents, and services performed by a third party can also be considered a gift-in-kind. Intangible gifts-in-kind are tax-deductible at fair market value.

Gift-in-Kind Exceptions

Property that is given to a charity for partial or limited use, gifts of time, personal effort, and donor-performed services are not deductible and are not considered gifts-in-kind. Likewise, corporate gifts provided by the corporation performing the underlying service, such as airline tickets gifted by the airline itself, are not considered gifts-in-kind. However, gifts of inventory by a company would be considered gifts-in-kind.

While volunteers can write off the cost of travel when they donate their time and service to a nonprofit, the hours and effort they contribute are not considered a gift-in-kind. For the same reason, a donor who opens her house to host a charitable event would not be considered to have given a gift-in-kind since the house is “given” for limited use only. However, if the host pays a third party to cater for the event, that may be considered a gift-in-kind.

Reporting Gifts-in-Kind

Not-for-profits must make a good-faith effort to determine the fair market value of every gift-in-kind received, and record that value on financial statements. It may be necessary to obtain appraisals for donations of tangible items like jewelry, art, or cars to determine the fair market value of those items.

The Financial Accounting Standards Board issued ASU (Accounting Standards Update) No. 2020-07, Not-for-Profit Entities, Presentation and Disclosure by NFP’s for Contributed Nonfinancial Assets in September 2020. This standard requires not-for-profits to present contributed nonfinancial assets as a separate line item in their statement of activities. It also requires new disclosures related to contributions of nonfinancial assets including certain qualitative information, not-for-profits' policies related to contributions of nonfinancial assets, donor-imposed restrictions, valuation techniques used, and principal market used to determine fair value. Not-for-Profits should familiarize themselves with these new reporting requirements to ensure compliance

The Gift of Good Advice from CRI’s Nonprofit Advisors

In-kind donations provide valuable resources that help nonprofits achieve their mission. By contributing goods or services, you can make a meaningful impact on the causes you care about. To ensure your organization properly evaluates and reports these donations, reach out to one of CRI’s not-for-profit advisors. They can help determine which contributions qualify as gifts-in-kind and assist in developing best practices for managing them effectively.