TaxNewsFlash-Exempt Organizations

October 17, 2008
No. 2008-102

PRINTABLE VERSION

IRS Announces Inflation Adjustments for Low-Cost Articles and Insubstantial Benefits

The IRS has released an advance copy of Rev. Proc. 2008-66, setting forth adjustments for inflation for tax years beginning in 2009 for, among other items, low-cost articles distributed in connection with solicitations for charitable contributions and benefits of insubstantial value provided in exchange for charitable contributions.

Distribution of "low-cost articles" in connection with solicitations for charitable contributions does not constitute an unrelated trade or business: For 2009, a "low-cost article" is an article that has a cost not in excess of $9.50.

Insubstantial benefits valuation: If a charity provides goods or other benefits in exchange for a charitable contribution, the amount of the donor's deduction is normally reduced by the value of the benefit provided, and the charity must advise the donor of the value of the benefit and the deductible amount of the contribution. If a charity provides certain small items or other benefits having "insubstantial value" to contributors in return for contributions, the value of such benefits is ignored, and the charity may advise contributors that their contributions are fully deductible. For 2009, benefits provided by a charity to a donor will be considered to have insubstantial value if:

The fair market value of all the benefits is the lesser of 2% of the contribution or $95, or

The contribution is $47.50 or more and (1) the only benefit received by the donor are “token items” (bookmarks, calendars, key chains, mugs, posters, tee shirts, etc.) bearing the organization's name or logo, and (2) the total cost (as opposed to the fair market value) of all the benefits received by the donor is within the limit for "low-cost articles" set forth above.

For an electronic version of the revenue procedure: Rev. Proc. 2008-66

Rev. Proc. 2008-66 will appear in a future edition of the Internal Revenue Bulletin.

For more information, contact Rick Speizman, National Partner-In-Charge, KPMG’s Exempt Organizations Tax Practice (ExoTax), at (202) 533-3084 or rspeizma@kpmg.com

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