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What Nonprofits Need to Know About In-Kind Contributions

July 28, 2022

Nonprofits, are you up to speed on reporting in kind contributions on form 990? We shed light on reporting donated goods, property, and stocks here. Read on.

Non-cash contributions also called in-kind contributions are contributions other than cash, checks, money orders and credit card donations. For 990 purposes, non-cash contributions include donation of goods/property and stocks; but NOT volunteer services performed for the reporting organization or donated use of materials, facilities, and equipment.

In general, the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 958-605-30-11 states that gifts-in-kind should be measured at fair value at the time of donation. The new guidance of ASU 2020-07 expanded the disclosure requirements for donated goods/property, contributed service and use of facilities. However, donated stocks are considered financial assets and not subject to the new guidelines.

Donated goods/property and stocks

Nonprofits should not recognize donated goods and property if the goods are not in a usable condition, the goods are for the benefit or another organization, or the value of goods is difficult to determine.

Nonprofits should have valuation methods established in the gift acceptance policy. Valuation methods may use cost or selling price, sale of comparable properties, replacement cost and expert's opinion to arrive at a fair value of goods and properties. The IRS Regulations have been clarified in recent legislation, and now require a “qualified appraisal” for any gift of $5,000 or greater. For collection items such as art, real estate, sports collections, or other unique properties, appraisals are required when the value is greater than $5,000.

Here is how to report donated goods/property and stocks:

  • Donated goods/property and stocks must be included on Form 990, Statement of Revenue (Part VIII) lines 1a-1f at fair market value (FMV) at the time of the donation. The donation is reported on line 1g "Noncash contributions included in lines 1a-1f"
  • If line 1g is more than $25,000 in FMV, nonprofit must check yes on Form 990, Part IV question 29 and Schedule M, (Noncash Contributions) must be prepared
  • On Form 990, Part IV, "checklist of Required Schedules" line 7 (conservation easement), 8 (artwork), 29 (schedule M), 30 (Schedule M art, etc.) may need to be updated
  • For certain type of nonprofits (mostly 501 (c)(3) organizations) over certain reporting threshold, FMV of the property, description of the property and date of the donation is required on Schedule B (Schedule of Contributions), Part II Noncash property.
  • The distribution of goods is reported on Form 990, Part IX, lines 1-3, as grants to individuals or organizations

Donated auction items

Donated auction items are usually reported on Form 990, Statement of Revenue, lines 1c, 1g, 8a and 8b. For example, a nonprofit received a donation of a guitar with a Fofo $50,000. The guitar was sold for $75,000 at auction and incurred $500 in cost relating to sale. The nonprofit should record $25,000 (75,000-50,000) as fundraising event contributions in line 1c, $50,000 gross income from fundraising events on lines 1f, 1g, 8a and $50,500 (50,000+500) direct expense on line 8b.

Donated stock

Nonprofits should record two relevant dates for donated stocks: receive date and sale date. For example, on 5/31/22, donated stocks were received from a donor with FMV of $30,000. On 6/15/22. nonprofit broker sold all shares with proceeds of $35,000.

  • On the 990, nonprofit should include $30,000 on the Statement of Revenue line 1f "All other contributions" and line 1g "Noncash contributions included on lines 1a-1f".
  • Subsequent stock sales of $35,000 is reported on line 7a as gross proceeds and cost basis is reported on line 7b.

Contributed service and use of facilities

Contributed services are services that create or enhance non-financial assets; or requires a special skill provided by professionals and craftspeople, which nonprofits would otherwise need to purchase. Many board members have specialized skills and are expected to utilize those skills as part of their normal board responsibilities. Those services are not recognized as contributed services. However, if board members use their expertise outside the scope of regular board duties, the services would constitute contributed services.

Donated services or use of facilities are not reported on Form 990 Statement of Revenue; and corresponding matching expenses are not reported on Form 990 Statement of Functional Expenses. However, they are reported as revenue and expenses in Generally Accepted Accounting Principles (GAAP) Financial Statements. The GAAP-Tax difference becomes a reconciling item on Form 990, Part XI, line 6 and Sch D, (Supplemental Financial Statements), Part XI line 2b and Part XII line 2a.

Occasionally nonprofits receive donated service or use of facilities in special events. The FMV of the donation and matching expenses should be excluded in special events reporting but included in GAAP-Tax reconciliation as well.

Questions? Contact us.

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