The season for fundraising events is approaching fast! It’s an exciting time of year, it can also be stressful following all the necessary state and federal fundraising requirements.
Let’s reduce your stress and address some of the most common fundraising event requirements.
We want your money!
First and foremost, if your organization solicits funds in the State of Michigan, you must apply for a license to solicit.
There are exceptions for small volunteer organizations, but the State of Michigan requires most charities to obtain a license. A great fundraising season starts with having the license to do so!
And the winner is…
Raffles can be a great way to gain group participation at a fundraising event. You’re conducting a raffle, if you’re distributing tickets in any form where a prize will be won.
While some raffles are exempt, most need a license.
Determine if your organization needs to apply. If it does, give yourself plenty of time before your event for the application to process and to receive your license. It can take up to eight weeks to receive the license after you apply.
Remember, the organization can be liable for withholding tax based on IRS guidelines regardless of whether the winner owes tax. Plan accordingly.
Finally, raffle tickets are a nondeductible item for the participant and shouldn’t be treated, or promoted, as a charitable donation.
And the highest bidder is…
Auctions are another common fundraising tool and typically include two donor transactions – someone donating auction items and the end buyer.
Give the donor who provided auction items a receipt according to IRS regulations. Make sure to exclude the value of the donated goods, which is up to the donor to determine. The buyer should also receive written acknowledgment of their total contribution less than the value of the goods received.
As with raffles, an organization needs to consider the tax implications of the auction. The nonprofit needs to investigate whether the sales qualify under sales tax laws.
All organizations should be aware they may need to file one of the following forms depending on the value of items received and when they were sold: Form 8283, Noncash Charitable Contributions; Form 8282, Donee Information Return; or Form 1098-C, Contribution of Motor Vehicles, Boats, and Airplanes.
Accounting for auctions can be tricky. Just remember, don’t double count revenue for the same item and you should be set.
You should record revenue based on the value of the donated good(s) received. Record additional revenues for any cash received above and beyond the value of the good(s).
Also, make sure to carry Director and Officer Insurance during this busy time of year to ensure adequate protection of the organization.
Following the guidelines above should ease some of the stress of the upcoming event season and allow more time for you to focus on reaching your fundraising goals! Good luck!
Have questions about fundraising requirements? Let’s talk!