Your donors play a critical role in the health of your organization. Donors give because they want to help support the work that you do and some also want to take advantage of a tax deduction. While your donor recognition letters should focus on what you are doing, it is critical they contain the correct information to support a potential tax deduction.
The Montana Department of Revenue uses the same rules as the IRS for charitable contributions. One interesting aspect of these rules is they require contemporaneous written acknowledgement. This means that your donor needs to have the document when they file their tax return and they do not have the ability to request a corrected letter after they file. A letter missing required information can result in their donation being denied a tax deduction.
One required statement is whether your organization gave any goods or services as a result of your contribution (other than certain token items and membership benefits). If something was given you need to provide a description and estimated value. If nothing was given you must state that in your letter.
To help make sure you are dotting your i’s and crossing your t’s we are sharing our letter with notes about the critical information: https://docs.google.com/document/d/16oqRReS8E3faaOqTStPgPWokYEaencVbdF9PE7WH_xE/edit?usp=sharing
If you are interested in the IRS rules they can be found here: https://www.irs.gov/pub/irs-pdf/p526.pdf
These rules also include information on non-cash donations. If you are unsure of how to document something out of the ordinary, please let me know and I can connect you with a CPA in your area.
Montana Society of CPAs