Donation Acknowedgement Letters
Anyone running a Rescue organization needs to know how to write donation acknowledgement letters that are informative to donors and that enable donors to utilize available tax deductions. Good acknowledgement letters may increase future donations.
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There is more to writing a good letter of thanks for a donation to your Rescue organization than is involved in writing the ordinary thank you note for a gift or social occasion that your mother taught you to write -- she did teach you , didn't she ? Because your Rescue is (or should be) a 501c non-profit tax exempt organization, some special rules can come into play. Also the psychology of making donors feel that they are glad they contributed and want to do so again is highly relevant.
Currently IRS regulations and some state tax regulations require that donors be able to document donations above a certain amount, currently $200, with a letter from the recipient 501c non-profit organization. Make sure you know how to write the acknowlegement letter for the $200 and up gifts, and make sure you know if your state laws require such letters for smaller gifts. Make sure you actually send the letter to your donor without having to wait for the donor to remind you. Donors who find their tax deduction challenged or denied for lack of proper documentation may not be eager to donate to you again.
The donation acknowlegement letter from the recipient 501c organization needs to say something on the order of "Thank you for your donation of $xxx made on date yyy (a date within the year for which the return is being filed) to our organization the ZZZ Foundation which is a non-profit 501c organization (it helps to cite the organization's TIN , Taxpayer Identification Number), and this is to affirm that you received no goods or services in exchange for your donation". The phrase "received no goods or services" should be considered to be "magic words' that must be spoken to make the spell work. These letters should be on the letterhead of the organization, signed by an officer of the organization, and should be a snail-mailed hardcopy. E-mail does not suffice.
Thus the nescessary elements of the letter are :
These letters are even more important if the donation is made in some form other than money. That kind of donation is deductable at its market value on the date it was donated -- NOT the amount the donor actually paid for it !! eg that ugly old oil painting that the donor found in the attic (or bought for $5 at the Thrift Shop because he/she wanted the frame to use for something else) and took to Antiques Roadshow and learned was worth $5000 and since the donor didnt want to keep it (or have to insure it) and didn't want to auction it (and pay capital gains tax plus auction fees) he/she donated it to the ZZZ foundation (eg Morris Animal Foundation, Erewhemos State Vet School, Bouvier Rescue of Erehwon State). In this case the letter should also state some kind of appraised value, or if the ZZZ foundation has sold the item could state the amount they actually recieved as an indication of value. For stocks, the value is based on the high and low it sold for on the stock exchange on the day you donated it ---even though the donor might have paid much more or much less when you bought it -- which is why donating appreciated stock or that ugly old oil painting can be a terrific deal for the donor as well as for the recipient charity.
Now you should also send a nice thank you letter to everyone who donates any amount at all (well lets say any amount over $5, and when the amount comes in with the donor's identity and address, which is not the case for a cash donation into the can at the Dog Rescue Fair). This letter can be quite informal and could go out as e-mail for the smaller donations, because the IRS or state tax authorities will probably not require the donor to have proof beyond a cancelled check. For this type of letter in addition to saying "thank you every so much for your generous contribution of xxx on date yyy", I would reccomend that each year you work up a section that gives donors some idea of how last year's donation reciepts were actually spent. eg "last year we recieved a total of donations of $3835 and with that money we were able to rescue 5 dogs, providing spay or neuter surgery for the 3 who were not already altered, providing shots and heartworm test for all of them, providing heartworm treatment for the one dog who needed it (costing aproximately $600) and life-saving tumor removal ($800 because the vet gave us half-off) for a dog who needed it." Or you might actually list each dog by name and give a very brief history and what expenses this dog had -- that really helps people see that some dogs have much higher expensses than any adoption fee could ever cover. (This same letter should be included as a second sheet with the letter for the $200 and up donors.) Letting your donors have some concrete idea how the money is being spent does two good things : (1) it gives them some confidence that you are using their money legitimately (yes, yes, I know, it does not PROVE that you actually did what you said you did) and (2) it may well inspire them to donate again in the future, perhaps even more generously.
You should of course also send some kind of informal and personal letter or e-mail to anyone who has done any kind of labor (eg groomed dogs, transported dogs, worked on the club website) or contibuted tangible items of modest value (eg an old crate, some collars and leashes). And of course generus priase and thanks must go to everyone who has fostered a dog for you, and for our foster homes I would also recommend public acknowledgement at club functions, such as the club's annual Awards Banquet or Christmas/Chanuka/Kwanza/Saturnalia Party.
I also do urge you to keep your vet receipts and reciepts for any other major expenditures and to do so in an organized way : all receipts for expenditures made directly by the organization and all those made by members and reimbursed by the organization. Keep your receipts and records in such a fashion that if the IRS ever wants to review your 501c status and legitimacy or if some son-of-a-man ever tries to calumny you with charges that you are scamming people, you will have all the evidence you need to prove your legitimacy. Sorry to say that this is the world we live in. I'm sure if St Francis were alive today and accepted the occasional donation , some idiot out there would accuse him of spending it on vacations on the Riviera or on buying his sandals at Birkenstocks and his bathrobe at Versatche.
So if you are running a 501c non-profit Rescue, be sure to have a good tax consultant or CPA to advise you!!! I am NOT a CPA nor a qualified tax attorney. this article is just meant to give you a general orientation to the subject. Consult your professional Tax Consultant for advice on any real issues that may arise.