John,

In short, your colleague shouldn't have to track museum shop discounts and
may not have to track discounts on workshops. The final IRS Substantiation
and Quid Pro Quo rules issued in December of 1996 included provisions
allowing some charity-provided benefits to be disregarded for the purpose of
calculating the charitable contribution deduction.  Generally, the benefits
include items of "insubstantial value"; "frequently exercised" membership
benefits, such as museum shop discounts; and admission to "members only"
events.  These exceptions to the quid pro quo rules generally apply to
membership packages of $75 or less, but to the extent the same benefits are
included in more expensive packages, they may be disregarded as well.

One of the reasons certain "frequently exercised" membership benefits were
allowed to be disregarded was because of the tracking problem, which the
nonprofit community, especially museums, brought to the attention to the IRS
when it was hammering out these rules.

Your colleague and his/her tax attorney need to dig into these final rules.
The final rules and accompanying explanations and examples are about 20
pages long.  Here are the cites for your colleague and his tax attorney:  61
Federal Register 65946 (December 16, 1996); 26 CFR Parts 1 and 602; TD 8690;
RIN-1545-AS94; "Deductibility, Substantiation, and Disclosure of Certain
Charitable Contributions."

The Federal Register can be searched on-line at http://www.access.gpo.gov

Usual Disclaimers
Barry Szczesny
AAM Government Affairs

Barry G. Szczesny, Esq.
Government Affairs Counsel and
Assistant Director
Government and Public Affairs
American Association of Museums
1575 Eye Street, NW
Suite 400
Washington, DC  20005

202/289-9125 Phone
202/289-6578 Fax
[log in to unmask]  E-mail
http://www.aam-us.org  Website


> -----Original Message-----
> From: John E. Simmons [SMTP:[log in to unmask]]
> Sent: Tuesday, January 25, 2000 2:52 PM
> To:   [log in to unmask]
> Subject:      Tax Deductible Questions
>
> I am posting this for a colleague who is not on Museum-L.  I will relay
> any
> responses to him.  Thanks.
> --John
> [log in to unmask]
>
>
> When a person makes a gift to one of our membership programs, we send a
> thank-you letter that documents the amount and date of the contribution.
> It also includes a (purposely vague) line about how the contribution is
> tax-deductible to the extent allowed by law. A member can deduct
> the amount of the contribution minus the market value of any benefits he
> or she receives in exchange for the contribution. We've now been asked --
> for the first time, surprisingly -- to provide documentation outlining the
> actual deductible amount of a member's contribution.
>
> Our problem has been that we can't anticipate the value of the benefits
> someone might receive. The principal benefits (at least from this point of
> view) are discounts on workshops and in the museum shop. When a member
> makes a gift, I can't know what will be the value of such
> benefits until the year ends, at which point we can, if we've tracked it,
> subtract the dollar value of the discounts received.
>
> There are two problems with this, aside from the one of tracking the
> member's use of our services, which would be a bother. The first is that
> some, perhaps most, members expect the documentation of the deductible
> value of their gift when we acknowledge the gift -- not at the end of
> the year. The second, more difficult problem, is that the membership year
> does not coincide with the tax year (the calendar year). So if I were to
> send statements outlining the value of benefits, how would I treat someone
> who, say, had a membership that renewed in December? I'd get,
> say, $100 on Dec. 15. On Jan. 1, I'd send a statement showing, probably,
> that no discounts had been received -- because there would have been no
> workshops offered in which the person could have enrolled and the person
> is likely not to have made any purchases in the shop. Then,
> during the next calendar year, the person or a member of his household
> might enroll in two or three workshops and make some number of purchases
> in the shop. The next December, I'd get another $100 as a renewal. I can
> scarcely deduct the value of the benefits received during most of
> the year from a gift that I didn't receive until the end of the year. The
> benefits this person has enjoyed were the result of the previous year's
> gift, not the gift made during the tax year for which I'm reporting. And
> the gift received during the tax year for which I'm reporting
> didn't arrive until after the benefits had been received, so they could
> scarcely be thought of as arising from that gift.
>
> Some of this is a matter for out tax attorney, with whom we will consult.
> But before we do, I'd like to be sure I know the range of questions I need
> answered, and I'd like to know how other museums handle these problems.
>
> *Do other museums track the benefits members are using and assign them
> dollar values? *Do they provide year-end statements to members? If they
> do, how do they ensure accuracy? (For example, if Jimmy Roberts enrolls in
> a workshop for 8-year-olds, how do I know to assign that benefit
> to a membership listed as "the Roberts household," or to "Donald and
> Sherree Roberts"? What if Jimmy's name is Johnson but he's nevertheless a
> member of the Roberts household?) Must we ask members to provide the names
> of all members of their household, and must we remind them to use
> the same names when enrolling in workshops or shopping at the museum?
> *Do other museums assign membership numbers, as country clubs do, or do
> they have some other technique for ensuring that a member benefit awarded
> can be assigned to the correct membership?
> *And how do other museums handle benefits during one year that arise from
> a gift made during a previous year?
>
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