FAQ Regarding Fundraising Auctions and Events (Noncash Gifts)
What is a "Charitable Organization?"
A Charitable Organization is anyone asking or collecting contributions from the public, and claims it will be used to support a charitable activity. Charitable is broadly defined and includes activities such as educational, recreational, social, patriotic, legal defense, benevolent, or health causes.
What is the difference between a Nonprofit Corporation and a Charitable Organization?
A Nonprofit corporation is an entity recognized by the state of Washington when “Nonprofit Articles of Incorporation” are filed with the Corporations Division of the Secretary of State. A charitable organization is any individual or entity, (regardless of corporate status) that fundraises in Washington to support a charitable activity. It is not unusual that a nonprofit corporation is also engaged in charitable activities and subject to separate reporting requirements with the Corporations and Charities Program.
501c3 is a Federal tax exempt status granted by the Internal Revenue Service. Certain requirements established through the Internal Revenue Code must be met in order to receive tax exempt status. For specific information regarding the application process, please refer to the IRS Web site at www.IRS.gov or call the Exempt Organizations Division at (877) 829-5500.
What is the difference between a Charitable Organization and 501c3 status?
A charitable organization in Washington State is defined as any entity that solicits or collects contributions from the public, where the contribution is, or is said to be used to support a charitable activity. Charitable activity includes, but is not limited to, educational, recreational, social, patriotic, legal defense, benevolent, or health causes.
501c3 is a Federal tax exempt status granted by the Internal Revenue Service. Certain requirements established through the Internal Revenue Code must be met in order to receive tax exempt status. For specific information regarding the application process, please refer to the IRS Web site at www.IRS.gov or call the Exempt Organizations Division at (877) 829-5500.
What is a Commercial Fundraiser or Professional Fundraiser?
A commercial fundraiser is an independent, third party that in exchange for compensation, conducts fundraising activities for a charitable organization. It is not unusual for commercial fundraisers to be hired by and paid for their fundraising services by multiple charitable organizations.
Who must register?
In most cases, the law applies to almost every organization or individual that fundraises in Washington State in the name of charity. This includes organizations located outside the state of Washington that solicit Washington State residents. If an individual or organization raises funds in the name of charity, it is considered a "Charitable Organization" for purposes of this statute, even if you don't think of the entity as a charity.
Do all states require a registration?
Most states have some type of registration or filing process. It is necessary for organizations contemplating fundraising activities into other states to research the individual state's reporting requirements to ensure compliance before fundraising activities begin.
Who is not required to register?
While most charities must register, there are some activities exempt from the state registration requirements. In Washington State, any organization that is one of the following is not required to register:
Organizations exempt from registration requirements are encouraged to file an "Optional Registration” with the Charities Program. The Optional Registration allows the Office of the Secretary of State to respond to customer inquiries.
Why is registration required?
The information is available to the public so potential donors can learn more about how their contribution will be used by the organization conducting the fundraising campaign. The benefiting charities as well as the third party paid to solicit funds must, in most cases, register and provide general and financial information concerning their activities. Registration with the Office of the Secretary of State should not be represented as an endorsement.
When does a donor need an appraisal?
Some donated property must have a qualified appraisal to determine the fair market value, such as book collections, fine art, jewelry (gems and precious metals), boats, and real estate. Generally, you will need an appraisal for donations of property for which you claim a deduction of $5,000 or more. Please see IRS Bulletin 2006-46 – Guidance Regarding Appraisal Requirements for Non-cash Gifts.
What are the rules for donating a vehicle?
Special rules apply to vehicles. The amount a donor may deduct for a vehicle contribution depends upon what the charity does with the vehicle as reported in the written acknowledgment sent by the charity. Charities typically sell the vehicles that are donated to them. If the charity sells the vehicle, generally the deduction is limited to the gross proceeds from the sale. However, there are certain exceptions, and you can learn more about them in IRS Publication 4303 “Donor's Guide to Vehicle Donations”
Is the recipient organization required to provide the donor with a receipt?
Tax-exempt organizations generally must provide the donor with an acknowledgement (without stating the value of the non-cash donation) to enable donors to claim the tax deduction. The organization is not responsible for determining the fair market value of donated items. The law imposes a penalty on a charity that does not provide the required acknowledgement. However, when donors drop off items worth $250 or less at unattended donation locations, an acknowledgement is not required.
A tax-exempt organization is required to provide written documentation to support the deduction and must include the following information:
A written acknowledgement may be provided at the time the donation is made, or by January 31st of the following year. The written acknowledgement can be either a paper document or in electronic format, such as an e-mail addressed to the donor.
There are examples of written acknowledgements, follow the link to IRS Publication 1771.
Is the recipient organization required to provide written documentation when non-deductible items are donated?
Charitable donations must meet specific criteria with the IRS to be tax deductible. The IRS does not require a charitable organization to provide a written acknowledgement of a donation that is not tax-deductible. If an organization receives a non-deductible item, then it should not provide a donor acknowledgement that might be mistakenly used to claim a tax deduction, but the organization can still thank the donor for the gift. For example, some organizations modify their normal thank you letter to state that the item is not tax deductible but that they appreciate the gift.