Our 501(c)(3) charity has an annual event where a large individual donor hosts a party at their home while we directly pay the vendor bills. We don’t charge for people to attend, but hope — and expect — to receive pledge cards. The party would be worth more than $75 if held in a restaurant. Do we need to provide the quid pro quo acknowledgment statement to donors? — By email.
No. A “quid pro quo acknowledgment” is required where a donor pays $75 or more to attend an event and gets goods or services in return. If you charged the potential donor $100 to attend the party, the potential donor would require the acknowledgment in order to know how much of the $100 was in excess of the fair market value of the party and therefore deductible as a charitable contribution. (See Ready Reference Page: “Charities Must Set Value on ‘Quid Pro Quo’ Gifts”) But in your situation, the prospective donors are not paying anything to attend and don’t have any right to claim a deduction for attending the party. The “quid pro quo” rules don’t apply. If they later decide to make a gift, they can claim a charitable contribution deduction for the entire amount.
One thing you do need to be concerned about, however, is insurance. Does the host have insurance that covers them and you if something untoward occurs? Do you have insurance that protects your organization? You don’t say who will actually run the party, but you can be sure that if something bad happens, you will be sued along with the host. We had a situation many years ago where some major donors held a fundraising party for a charity at their home. Guests congregated on the outside deck to look at their very nice back yard gardens — until the deck collapsed and several of the participants were injured. That litigation dragged on for years.
We discussed some of the other issues with third-party fundraising recently in our webinar on Top 10 Critical Policies for Nonprofits.
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