The timing and content of gift receipts by nonprofits for charitable gifts over $250 can mean the difference between a generally happy situation and a very unhappy one (where your donor loses his deduction, with significant legal costs no less!).

The gift acknowledgement rules are simple:

1. Donor must receive gift receipt (for gifts over $250) by the time he files his tax return covering the year of the gift (filing date or due date – whichever is earlier).
2. The gift receipt must include language that clearly states that no goods or services were offered in return for the gift being acknowledged.

Miss either of these rules and you are looking for trouble.  And, that is exactly what the charity in a recent tax case must be going through right now.

What was the case?  Charity sent a thank you letter to the donor for $22,000+ in gifts soon enough after the gift but it didn’t include the “no good or services” statement. Then, a year later, the charity gave the donor a letter with the right language about goods or services.

Easy case: deduction denied by the tax court.

There are times a taxpayer can get away with “substantial compliance” but not here.  If you want to read the case, click here: Chartiable Contr Deduction Durden TC Memo 2012-140.  Otherwise, get the right language into your gift receipts!