OCTOBER 16, 1995
Charitable Deduction Guidelines
By Gary Klott
Money Watch -- Money Matters
Life should be a bit simpler -- and a little less costly -- for both charities and donors under new guidelines proposed by the Internal Revenue Service.
The guidelines list a variety of benefits that museums, zoos and other organizations often provide to donors -- such as free admission and discounts on gift-shop merchandise
--which you'll no longer need to worry about when figuring your charitable deduction.
The proposed regulations are the latest attempt by the IRS to clear up confusion over new substantiation requirements that took effect last year. Under the 1993 deficit-reduction law, charities must give donors a written estimate of the value of any benefits provided when soliciting contributions of more than $75.
The new requirement was mandated by Congress because many donors were failing to reduce their charitable deduction by the value of benefits received.
For example, if you donate $80 to a public TV station and receive a $25 book in return, you can only deduct $55 of your contribution.
Charities complained that many benefits they provide to donors are tough to value. For instance, it's impossible for a museum to value the privilege of gift- shop discounts since it can't predict how much merchandise a donor will actually buy.
In a charitable gesture of its own, the IRS has decided to let charities and donors completely disregard some common benefits.
Previously, only token items of ``insubstantial value'' -- such as coffee mugs bearing the organization's name -- could be disregarded.
The new IRS guidelines, which are subject to a public hearing November 1, greatly expand the types of benefits that can be ignored.
--MEMBERSHIP BENEFITS: Many nonprofit groups offer donors who make a minimum level of contribution the chance to become ``members'' of the organization and receive special privileges. The IRS says these membership privileges can now be ignored if the annual membership is priced at no more than $75 and the privileges are the type that can be used frequently during the year. They include free or discounted admission to the organization's facilities or events, free parking, preferred access to goods and services, and discounts on purchases.
To illustrate, the IRS gave the example of a performing arts center offering a $75 membership that included the right to purchase tickets to performances before they go on sale to the general public, free parking at the center during performances, and a 10 percent gift-shop discount. All these benefits can be disregarded when figuring your charitable deduction. And charities are no longer required to value these benefits for donors.