This Insights article was contributed by Sandy Crumrine, CPA.
 
Public charities depend on donations from private citizens and businesses to continue their good works. 

Not all the contributions that keep these organizations running, however, are cold, hard cash. Non-cash contributions, also referred to as “in-kind giving,” are gifts of tangible assets, such as food, clothing, office supplies or medical supplies. Donated goods may be used, surplus, or brand new. In-kind gifts may also be intangible such as advertising or professional services.    

In-kind gifts are particularly useful to charitable organizations if they are central to the organization’s mission or free up cash for operating essentials, such as payroll. Beyond revenue and cost savings, many charities find in-kind donations an effective way to cultivate supporters and build capacity.

From the donor’s perspective, in-kind contributions provide an ideal opportunity for corporate donors to be more generous than they might otherwise be. If your philanthropy budget is tight, in-kind gifts may offer a more accessible giving pathway. Donors receive a sense of satisfaction from passing useful items they no longer need on to charities, and many in-kind gifts are tax deductible to the donor. 

Pharmaceutical companies are often at the top of the list of in-kind donors, giving away billions of products each year, and tech companies are also commonly generous at in-kind gifts. If you think that you or your company does not have goods or service that are easy to donate, think again. Every company has something to offer when it comes to in-kind giving.

Public charities are required to report all cash and In-Kind gifts above a defined dollar value on Schedule B, Schedule of Contributors, of their annual IRS Form 990, Return of Organization Exempt From Income Tax, including the donor’s name, address, and the amount donated. When an organization receives in-kind gifts of more than $25,000 during the tax year, Schedule M, Noncash Contributions, must be completed listing the number of items received, the value of each, and the method for determining the value.

Although there is no single formula for determining the value of donated goods, the IRS’s Publication 561 is a guide to determining the fair market value (FMV) of donated property. The FMV is the agreed-upon price that the property would sell for on the open market between a willing buyer and seller. In-kind gifts above a certain FMV must be accompanied by an appraisal. Good record-keeping is essential.

Keep the following in mind when considering making an in-kind gift:

• Ask before you give. Contact the public charity to make sure they can make good use of your contribution. If not, find an organization that can. Most public charities publish a “wish List” of specific items they need.
• Place an accurate value on your donation. Let the public charity know the value of your in-kind donation and the method by which you determined it. Good recordkeeping is for your benefit, as well as the charity’s, especially if you intend on deducting your donation. 
• Don’t assume your donation is tax-deductible. It is important to note that not every in-kind donation is tax deductible; donated services are generally not recognized by the IRS.

Every company has something to offer when it comes to in-kind giving. There is tremendous value in this form of giving for both the donor and the receiver, so apply a little thought and creativity to the question of how your business’s unique profile can be of distinct service to a public charity in your community. The possibilities are endless.
 
Chad Wouters, CPA joined Earney & Company in December 2006 and became the tax partner in November 2013. With an emphasis on strategy and planning, Chad works with his clients all year to ensure the most efficient tax strategies are put into place.  Earney & Company, L.L.P.  is a CPA firm that handles tax compliance, consulting and planning as well as audit and other assurance services.  For more information please visit www.earneynet.com or call (910) 256-9995.  Chad can also be reached at [email protected].