Gift acknowledgements: Saying ‘thank you’ to donors
There are no magic words that each nonprofit must include in ‘thank you’ notes to donors, however, it’s important to be familiar with what donors expect, as well as what the IRS requires charitable nonprofits to include in the “gift substantiation” message. We also encourage you to think about how to personalize saying ‘thank you.’
- The IRS website provides a comprehensive section on "gift substantiation."
- Infographic: personalizing your 'thank you' to donors (Classy)
Why are written ‘thank you’ letters important?
IRS regulations require that before a donor claims a tax deduction for a charitable contribution, the donor must have a bank record or a written communication from the charitable nonprofit documenting the contribution. As a result donors expect a nonprofit to provide a receipt for their contribution. Donors are technically responsible for making sure they have a written gift acknowledgment for any single contribution of $250 or more. There is no legal requirement for gift acknowledgements for contributions of less than $250 unless the donor receives something of value in return for the gift, which triggers special rules for “quid pro quo” contributions.
- IRS Publication 1771 - Charitable Contributions: Substantiation and Disclosure Requirements
What the law requires
All gift acknowledgments should contain:
- A statement that the nonprofit is a charity recognized as tax-exempt by the IRS under Section 501(c)(3);
- Either (a) amount donated (if cash or cash equivalents); or (b) description of the property donated (the nonprofit should not attempt to assign the cash value of property; doing so is the donor's responsibility);
- The date the donation was received;
- Either: (a) statement whether your organization provided any goods or services in return for the donation, such as, "No goods or services were received in return for this gift"; or (b) if the gift was $75 or more, and the nonprofit did provide something of more than insubstantial benefit in return for the gift, (such as tickets to a special event or a dinner), then the charity must include a good faith estimate of the value of the goods/services provided (such as the market value of tickets to the event or the actual cost of the dinner – even if it was donated to the charity).
When should an acknowledgment be sent?
Soon! Regardless of the regulations, donors expect to receive a ‘thank you’ for any size of contribution, and they also expect it soon after making their gift.
Sending the acknowledgment within a short period of time of the gift reassures the donor that the donation was received and solidifies donor relations.
- In many states the charitable registration regulations require a disclosure statement on written solicitations and gift acknowledgements, so be sure to include that disclosure statement when your nonprofit sends an acknowledgement of any gift/pledge if required. Read more about state charitable registration requirements.
- Get your whole staff (and board!) involved with a "Thank-a-thon." (Toolkit courtesy of LAPA)
- It’s helpful to have a template ready to send out that can be customized as donations arrive, and it's imperative to have a good system for recording who gave what, when, and how much. Many donor management software solutions exist.
- Keep track of pledges too, since they must be accounted for in the year in which the pledge is made, even if the gift doesn’t arrive in that fiscal year.
- Gifts-in–kind, with a market value in excess of $5,000, may require an appraisal (that the donor can be required to pay for).
- Have you considered a ‘thank you’ phone call? 5 Best Practices for ‘thank you’ Phone Calls
- IRS Publication 1771: Charitable Contributions: Substantiation and Disclosure Requirements
- All about quid pro quo contributions (National Council of Nonprofits)
- Tip Sheet on Saying Thank You to Donors (National Council of Nonprofits)
- For donors: Can I deduct my charitable contribution? (IRS Mini-Course)
- Thanking donors for non-cash gifts, such as in-kind-gifts/donated property (IRS)
- How to value gifts purchased at charity auctions (IRS)
- A charity's guide to vehicle donations (IRS).
- A Consumer’s Guide to Donor Management Systems (Idealware)
- A Consumer’s Guide to Low Cost Donor Management Systems (NTEN and Idealware)
- Do you need a new donor management system? (TechSoup)
- Why are nonprofits so terrible at acknowledging gifts? (GuideStar)
- Best practices in donation valuation (Video, Good360)