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2023 IRS Benefits Inflation Adjustments Announced

  • 1.  2023 IRS Benefits Inflation Adjustments Announced

    Posted 10-19-2022 05:39 AM
      |   view attached
    The IRS has released Rev. Proc. 2022-38 outlining many of their 2023 inflation adjustments. Included are the new values for benefits given in exchange for charitable contributions. I have included for you a copy of the Procedure. The relevant information begins on page 18.

    In summary, in 2023, you can provide "low cost" token items that contain your name or logo without disclosure or gift reduction as long as the donor makes a minimum gift of $62.50 and the combined value of all associated benefits does not exceed $12.50. 

    For more substantial benefits, a gift remains fully deductible as long as the combined value of all benefits associated with a gift does not exceed $125 or 2% of the amount given, whichever is less. (The 2% figure has not changed in decades).

    Please remember that the token benefit rule only applies to gifts of $62.50 or more. Meaning that for donations below that amount, the 2% rule applies. For example, for a $50 gift, the value of the token benefit must be less than $1. Else the full value must be subtracted from the donation to calculate the deductible amount.

    Also, remember that DAF and private foundation donors can only receive the token benefits - never anything more.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987

    Attachment(s)



  • 2.  RE: 2023 IRS Benefits Inflation Adjustments Announced

    Posted 4 days ago
    John,
    The token value is the retail value of what they'd pay for the item themselves, not the college's cost, correct?  E.g. A college orders a bunch of mugs at $1 each which would be $5 in the store, the token value that needs to meet the substantiation rules is $5.  Do I have that straight?

    ------------------------------
    Jennifer L. Boettger
    Director of Advancement Services
    Coe College
    jboettger@coe.edu
    ------------------------------



  • 3.  RE: 2023 IRS Benefits Inflation Adjustments Announced

    Posted 4 days ago
    I should have added that I have an old old old piece of paper wedged in my CASE RSMG that says, "These token items are deemed to be 'low cost articles' if their cost (as opposed to their fair market value) does not exceed $[X], in the aggregate, for all items received by the donor during that year."  So I've gotten myself confused.






  • 4.  RE: 2023 IRS Benefits Inflation Adjustments Announced

    Posted 4 days ago
    These "low-cost" items are typically valued at wholesale prices. As these token benefits are usually purchased in bulk, it is that bulk per item cost you should use.

    Remember that to qualify, not only must the cost be under the current year threshold, but the token item must reflect either the organizations' name or logo.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987







  • 5.  RE: 2023 IRS Benefits Inflation Adjustments Announced

    Posted 4 days ago

    Indeed.

     

    The potentially confusing factor is that the organization's cost to acquire the items applies only to this single provision, having to do with providing low-cost items bearing the institution's name or logo, provided in return for a gift of at least a minimum (inflation-adjusted) amount.

     

    In all other quid pro quo situations, the benefit is treated at its Fair Market Value (FMV), and not at the organization's cost.

     

    (You may be interested to learn that this low-cost item provision has its roots in a slightly different context, that of an organization sending out some item as part of a gift solicitation, in anticipation of receiving a gift, the predecessor to the current ubiquitous practice of sending out return address labels with the solicitation, perhaps.  The concern was that, if the charity sent out something valuable enough, a gift in return wasn't necessarily entirely charitable, so the tax code limited the value of what could be sent out in this sort of enticement.  That was later applied to the now-more-common sequence, where we receive a gift and send a low-cost item in response.  That is also why this one provision references a different part of the tax code than where we find most of what governs charitable contributions.)

     

    My US$0.02 worth; the usual disclaimers apply.

     

    Good luck!

     

    Alan

     

    Alan S. Hejnal    (he/him/his)

    Data Quality Manager

     

     






  • 6.  RE: 2023 IRS Benefits Inflation Adjustments Announced

    Posted 3 days ago
    Regarding FMV benefit amounts, is there a different document that gives guidance on the benefit amounts associated with a dinner or gala? Way back when, I remember having a deck that told me how much the food/beverage costs were for tickets associated with a breakfast/brunch/dinner/cocktail hour were.

    ------------------------------
    Jessica Baker
    Director, Data Quality, Gift Processing, Strategy
    University of Texas at Austin
    jbaker@austin.utexas.edu
    ------------------------------



  • 7.  RE: 2023 IRS Benefits Inflation Adjustments Announced

    Posted 3 days ago
    The IRS does not provide that guidance - other than to use "the fair market value," which they define as "what a willing buyer will pay a willing seller."

    Your events team likely has reference guides for calculating the projected cost of an event. That's a good place to start. But that only helps with estimating costs and consumption. You still must consider the venue, entertainment, ambiance, and such when determining the value for IRS purposes.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987