“No good or services were received in exchange for this contribution.”

Nice, clear language. Often provided in receipts to donors by many nonprofits.

The problem is in the words “often” and “many.” Because now they are absolutely required in order for the IRS to allow your donor to take a deduction for that donation. In 2012 there were two US Tax Court cases that challenged that requirement, offering things like thank you notes and paid checks as evidence of the donation. Not good enough, said the court in both cases, to prove there was not a benefit to the donor. A nice hand-written thank you note is very often sent to large donors by a grateful executive director, and nothing more is said about it. But if the thank you stops there, if there is no formal receipt with the magic words first offered in this post, the IRS can, and has already been able to, deny the deduction on tax returns.

So keep your donors happy. Send them that hand-written thank you note if it will make them happy, but include the magic words to avoid making them really unhappy come tax time.

As always, I welcome your comments and feedback.