As one of the benefits to those who sponsor our fundraiser, we give them a number of tickets to the exhibit, depending on their level of sponsorship. When calculating the benefits, we have never included the value of those tickets because additional tickets do not cost us any more since there is no food or anything like that. The cost to produce the exhibit is the same if we have 1 person or 5,000 people go through. Is this ok or should we be including the ticket price in our benefit amount?
You should be including the price of the tickets in your benefit amount so that the sponsor’s charitable contribution deduction is reduced by the value of the tickets. The Treasury Regulations on sponsorships provide that a sponsor may not claim a charitable contribution deduction to the extent that the sponsor receives goods or services of more than insubstantial value in return. (See Ready Reference Page: “IRS Finalizes Regs Covering Sponsorships”)
As in all “quid pro quo” situations, the value the donor receives is not fixed by the cost to the charity providing the goods or services. If a caterer provides the entire annual gala dinner for free, the test is still the value of the dinner in the general marketplace. You presumably have an established price for your exhibit tickets, so if you provide 10 tickets to your sponsor, the amount that can be claimed as a charitable contribution has to be reduced by the value of the 10 tickets.
If the sponsor doesn’t care to see the exhibit and declines to accept the tickets, of course, the sponsor can then claim a charitable contribution deduction without regard to the value of the tickets. But if the sponsor accepts the tickets and has the right to attend, the charitable deduction must be reduced by their value, whether or not the sponsor actually shows up.