Understanding Non-Cash Gifts to Nonprofit Organizations

A guide to types, examples, and implications for nonprofits

When individuals or businesses seek to support nonprofit organizations, they often think first of monetary donations. However, non-cash gifts – also known as in-kind contributions – play a vital role in furthering nonprofit missions. These gifts can take many forms, each offering unique benefits and considerations for both donors and recipient organizations.

What are non-cash gifts?

Non-cash gifts refer to contributions of items, services, or assets other than money. These donations can fill important needs within nonprofits, often allowing organizations to save resources or expand their impact.

Common types of non-cash gifts

• Tangible Goods: Computers, office furniture, art, books, or clothing.
• Real Estate: Property such as land, houses, or commercial buildings.
• Stocks and Securities: Donating appreciated stocks, bonds, or mutual funds can offer tax benefits to the donor.
• Vehicles: Cars, trucks, and even boats.
• Services: Professional services – such as legal advice, graphic design, or construction.
• Collectibles and Valuables: Items like jewelry, artwork, rare books, or collectibles can be donated for use, display, or auction.

Implications for nonprofits accepting non-cash gifts

Non‑cash gifts provide valuable support but come with compliance responsibilities that nonprofit organizations should consider before accepting. A strong gift acceptance policy is important in making sure the gift aligns with the organization’s mission, to manage risk and maintain compliance.

1. Proper valuation

Nonprofits must determine or confirm the value of the donated asset so it can be reported correctly on both:

• • Donor tax forms
  • The nonprofit’s financial statements (including Form 990)

2. Required IRS Forms

Depending on the gift type, nonprofits must prepare or sign specific IRS forms, such as:

• • Form 8283 – required when a donor claims a deduction for non‑cash gifts over $500.
    – Section A: for gifts over $500 and up to $5,000.
    – Section B: for gifts over $5,000, requiring a qualified appraisal and the nonprofit’s signature.
  • Form 8282 – filed by the nonprofit if it disposes of donated property within 3 years of receipt (excluding publicly traded securities).
    – Threshold: property valued over $5,000.
  • Form 1098‑C – required for donated vehicles

3. Proper acknowledgment letters

Nonprofits must send donors written acknowledgments that meet IRS standards. These letters must include certain details depending on the asset donated.

A written acknowledgement should include:

• • The non-profit’s name
  • The donor’s name
  • The date and description of the contribution/donation
    • Only a description of the non-cash gift is needed (The nonprofit does not assign value)
  • A statement about whether goods or services were provided
    • If so, include a good faith estimate of their value
    • If not, include a statement such as “No goods or services were provided in exchange for this gift.”

4. Form 990 reporting

Non-cash gifts usually require special reporting on a nonprofit’s annual tax return. This adds complexity and must be handled accurately.

5. Evaluating risk and administrative burden

Some gifts are more trouble than they are worth.
For example:

• • Real estate may come with maintenance issues
  • Artwork may require insurance or storage
  • Shares of a small business may carry legal complications

Best practices for nonprofits

• Develop a clear gift acceptance policy outlining which types of non-cash gifts are welcome and the process for evaluating them.
• Consult with legal and financial advisors when considering complex or high-value gifts.
• Communicate openly with donors about how their gifts will be used and whether the organization may sell or otherwise dispose of the donated asset.
• Ensure proper documentation and acknowledgment of non-cash gifts to comply with tax regulations and express gratitude to donors.

Conclusion

Non-cash gifts can make a significant difference in the work of nonprofit organizations, providing resources and opportunities beyond what monetary donations alone can offer. With careful planning and thoughtful acceptance policies, nonprofits can maximize the benefits of these generous contributions while managing their responsibilities effectively.

For guidance on non-cash gift considerations, contact your Not-for-Profit Keiter Opportunity Advisor | Call 804.747.0000 | Email