Quid Pro Quo Contribution

What Is a Quid Pro Quo Contribution?

Many nonprofit foundations and organizations rely on charitable donations from corporate sponsors and individuals to meet a large part of their funding needs. These can be solicited in many different forms, from one-off contributions to ongoing sponsorships from businesses in the community.

During the holidays, it is not uncommon to see organizations such as The Salvation Army collecting individual donations from patrons as they enter or exit retail establishments. Generally, these donations are made without the donor expecting anything in return except an itemized tax deduction.

A quid pro quo contribution, however, is a charitable donation for which the donor gets something of value from the recipient in exchange for their funds. The organization has created an incentive to the donation. It’s a device designed to grease the wheels of fundraising.

Key Takeaways

  • A quid quo pro contribution to charity is a contribution for which the donor receives something of value in return.
  • Quid pro quo contributions are designed to incentivize giving.
  • At tax time, the donor must deduct the dollar value of what they received from the full amount of the donation they made; thus, they arrive at the correct sum to claim as a tax deduction.

Understanding a Quid Pro Quo Contribution

A typical charitable donation is different from a quid pro quo contribution in that the donor receives nothing from the charity in return for the gift or deposit. The rules for tax deductions for quid pro quo contributions are also different.

With a typical donation, the donor can deduct the full amount as long as the donation meets eligibility requirements. With a quid pro quo contribution, the deductible amount is the difference between the donation and the fair market value of the goods or services that the charity provided the donor with in exchange.

For the 2021 tax year, even taxpayers who take the standard deduction rather than itemize are allowed to deduct a certain amount of charitable contributions, with the limit being $300 for single filers and $600 for a married couple filing jointly.

An Example of a Quid Pro Quo Contribution

During summer vacation, Beth sees that her daughter Lauren’s school is trying to raise money to buy plants and materials to make a school garden. Beth is excited about the prospect of her daughter learning how to grow fresh fruits and vegetables and gladly donates $75 to the school. As a thank you, the school offers some of the top donors gift certificates to the farm stand that they will be setting up at the end of the school year to sell off the surplus fruits and vegetables harvested from the garden. This is a quid pro quo donation, as Beth received something in return for her monetary contribution. If the school was only soliciting funds and not offering anything in return, then it would not qualify as quid pro quo.

When it is time for Beth to file her taxes, she remembers the $75 donation and the $5 gift card that she received in exchange. When she goes to add the contribution to her itemized deductions for the tax year, she can only use $70 from the donation, which is the difference between the donation and the gift that she received in return. If she hadn’t received the gift card, she would have been able to use the entire balance of the $75 donation.

The charity, however, does not have to remind Beth of the $5 gift card. The Internal Revenue Service (IRS) only requires written disclosure statements to be sent to donors if their total quid quo pro contribution (not just the deductible amount) was greater than $75. Beth, however, would be responsible for remembering it herself and deducting $70 rather than $75.

What is a quid pro quo contribution?

A quid pro quo contribution is a charitable donation for which the donor is rewarded with something of value by the charity in question.

What is the purpose of a quid pro quo contribution?

Offering something of value in return for a donation is a way for a charitable organization to prompt donations that otherwise might not be forthcoming.

Is a quid pro quo contribution tax deductible?

Yes, but it does have tax implications. A regular contribution to a qualified charitable organization can be deducted in full by taxpayers who itemize their deductions. However, with a quid pro quo donation, the donor must deduct the fair market value of what they received from the charity from the full amount of their donation to arrive at the allowable tax deduction.

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  1. Internal Revenue Service. “Substantiating Charitable Contributions.”

  2. Internal Revenue Service. “Expanded Tax Benefits Help Individuals and Businesses Give to Charity During 2021; Deductions Up to $600 Available for Cash Donations by Non-Itemizers.”