Unlock the Benefits of Special Event Contributions! Understand How They Impact Your Donations and Taxes

Learn how your contributions to special events are split and reported. Essential reading for donors and nonprofit organizers.

What Are Special Events?

Special events, such as galas, luncheons,golf tournaments, shows, and auctions, are fundraising activities designed to raise money for nonprofits. Unlike educational programs or member meetings,these events are not part of the core activities of the organization.

Ticket Costs and Donations

When purchasing a ticket for a special event, the price is divided into two parts:

1. The cost of what you receive, like food and entertainment.
2. The donation part, which is the remaining portion of the ticket price.

For tickets costing more than $75, the organization is required to inform you of how much of the ticket price covers the cost of goods and services and how much is considered a donation. This estimation must be done prior to the event.

Why It Matters

These events are generally not taxed because they:

• Occur infrequently (e.g., once a year).
• Are primarily run by volunteers.
• Are not intended to generate profit.

Reporting on Tax Forms

On IRS Form 990:

• Donations are reported on Line 1c.
• Event revenue is reported on Line 8a.
• Event costs are reported on Line 8b, with the net amount shown on Line 8c.

Often, these events show a loss because most revenue is counted as donations. If the total revenue from special events exceeds $15,000, additional details must be reported on Schedule G, Part II of Form 990.

Important Notes for Donors

• For tickets over $75, the organization must specify the portion of the ticket price that covers goods and services versus the donation.
• For tickets $250 or more, the organization must provide a statement detailing these amounts. Refer to IRS Publication 1771 for specific wording requirements.

Auctions and Raffles

• Auctions: Special rules apply. Visit our website for more information on charity auctions.
• Raffles: Considered gambling. The cost of raffle tickets is not deductible as a donation, and the revenue from raffles is taxable. Many states require a gambling license for raffles, even for one-time events hosted by nonprofits.

What Accountants Can Do

As accountants, ensuring that these events are treated correctly involves several key steps:

1. Accurate Allocation: Properly allocate ticket prices between the cost of goods/services and donations. This involves careful estimation before the event and clear communication to attendees.
2. Detailed Record-Keeping: Maintain meticulous records of all transactions, including ticket sales, donations, and expenses related to the event. This will facilitate accurate reporting on IRS Form 990.
3. Compliance with Tax Regulations: Ensure compliance with IRS requirements by correctly reporting donations on Line 1c, event revenue on Line 8a, and event costs on Line 8b. If total revenue from special events exceeds $15,000, complete Schedule G, Part II.
4. Communication with Donors: Provide donors with the necessary statements for tickets over $75 and $250, detailing the portion of the ticket price that is tax-deductible. Follow the specific wording requirements of IRS Publication 1771.
5. Handling Auctions and Raffles: Follow special rules for auctions and ensure compliance with state regulations for raffles. This includes obtaining necessary licenses and understanding the tax implications.

By adhering to these practices, accountants play a crucial role in ensuring the financial and regulatory integrity of nonprofit special events, ultimately supporting the organization's fundraising efforts and maintaining donor trust.

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