Publication 1391

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Deductibility of Payments Made to Charities Conducting Fund-Raising Events


I saw references to this 1988 publication, but had an extremely hard time tracking it down. Even the IRS claimed not to have any more copies of the publication.


From the Commissioner

As Commissioner of Internal Revenue, I am sending this message to charities to ask your help in more accurately informing taxpayers as to the deductibility of payments by patrons of your fund-raising events.

I am concerned that sponsors of fund-raising events have often failed to provide written information on the extent to which payments for such affairs are deductible as charitable contributions.

There has been widespread misunderstanding of the limitations on the deductibility of such payments. This misunderstanding has led, of course, to erroneous tax reporting of these payments by some patrons.

The Congress also has evidenced some concern in this area. The House Budget Committee, in its Report on the Omnibus Budget Reconciliation Act of 1977, page 1607, states that it "is concerned that some charitable organizations may not make sufficient disclosure, in soliciting donations, membership dues, payments for admissions or merchandise, or other support, of the the extend (if any) to which the payor may be entitled to charitable contributions for such payments." The Report, on page 1608, then states:

"...the committee anticipates that the Internal Revenue Service will monitor the extent to which taxpayers are being furnished accurate and sufficient information by charitable organizations as to the nondeductiblity of payments to such organizations, where benefits or privileges are received in return, so that taxpayers can correctly compute their Federal income tax liability. The committee also anticipates that groups representing the charitable community will further educate their members as to the applicable tax rules and provide guidance as to how charities can provide appropriate information in this regard."

Because of this expression of Congressional interest, as well as the continued concern of IRS, I shall institute a Special Emphasis Program for the 1988 tax year. It will focus on the fund-raising practices of charitable organizations, as well as organizations that perform fund-raising functions for charities. Through this Special Emphasis Program, the IRS shall seek to ascertain the extent to which taxpayers are furnished accurate and sufficient information concerning the deductibility of their contributions.

In applying the law, there is a presumption that the total amount paid represents the fair value of substantial benefits received in return—thus eliminating any charitable contribution deduction. Organizations, nevertheless, can use the fund-raising affairs to solicit gifts—and they can help ensure that these gifts will be recognized as deductible—if they follow certain relatively simple soliciting and receipting practices.

Revenue Ruling 7-246, 1967-2 C.B. 104, describes the rules on charitable contributions and gives a number of examples illustrating how the rules apply in common situations. The full text of the ruling follows this message. I hope you will keep this ruling in mind if your organization sponsors or participates in a fund-raising event.

I would particularly like to emphasize that part of the ruling which states the importance of determining, in advance of solicitation, the portion of payment attributable to the purchase of admission or other privilege and the portion solicited as a gift.

The ruling says that in those cases in which a fund-raising activity is designed to solicit payments intended to be in part a gift and in part the purchase price of admission or other participation in an event, separate amounts should be stated in the solicitation and clearly indicated on any ticket or other evidence of payment furnished to the contributor. By following this rule, the organization engaged in fund-raising events will be helping taxpayers comply with the income tax laws, as well as avoiding possible embarrassment to itself and its patrons.

If you have any questions regarded Revenue Ruling 67-246, or you would like us to explain how the ruling applies to your particular situation, please contact your local Internal Revenue office.

/s/ Lawrence B. Gibbs

Commissioner of Internal Revenue

[Followed by Rev. Rul. 67-246]


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