Q&A #40 – How should nonprofits acknowledge donation checks received after December 31?
Question: My nonprofit organization has never been sure how to handle donor acknowledgment letters for checks that donors send in December but don’t arrive until January. I think we may have quite a few of these this year due to recent mail delays and the fact that we have not been checking mail at our office as often due to COVID-19. Under what circumstances are we allowed to tell donors that their donations can be deductible for 2020 when we don’t receive the checks until after the new year?
Answer: You are asking about what is known informally as the “mailbox rule.” The short answer is that donors are permitted to treat a charitable contribution as made on the date it is placed in the mail via U.S. Postal Service, even if the check is not delivered or cashed until the following year, see Treas. Reg. § 1.170A-1(b). While it is not the charity’s responsibility to establish the date of delivery in the acknowledgement letter, you want to be as helpful as you can be to your donors. This can lead to some tricky situations.
If the envelope holding the check is postmarked in December, you should reference the postmark date in the acknowledgement letter, e.g. “Thank you for your contribution of $10,000, postmarked December 29, 2020.” It is a good idea to send a copy of the postmarked envelope to the donor, because this is important evidence for the donor’s tax records.
More challenging scenarios can arise, such as when the postmark date is in January and the check is written with a December date. In this case, it is possible that the donor put the check in the mail in December, although this will be very difficult for the donor to prove. The charity cannot speculate or misrepresent factual details in the acknowledgment letter, and should avoid giving the donor legal advice about the year of deductibility for tax purposes. You may note objective facts if the donor finds this helpful, such as the date written on the check and the date it was received at your office, e.g. “Thank you for your contribution of $10,000. This check was dated December 29, 2020 and was received at our office on January 4, 2020.”
Planning Tip – Confusion regarding calendar year-end contributions can be mitigated through proactive donor outreach and education. In your end-of-year fundraising communications, consider reminding donors that donations should be postmarked by December 31st in order to ensure eligibility for the charitable deduction for the current taxable year. You may also wish to inform donors about your organization’s policy regarding the handling of end-of-year checks, such as whether the organization only refers to the postmark date in its donor acknowledgments as a matter of policy.
While the mailbox rule has become less relevant over time as more donations are made using online payment platforms, some donors do still send checks and wait until the end of the year to do so. Thus, it is still important to know the rules and plan for how your organization will handle these problematic situations when they come up.
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