Clarifying the rules: Donor-advised funds and event tickets 

Many of your clients are likely involved in multiple charitable organizations, not only as donors, but perhaps also as board members. Indeed, research indicates that 85% of affluent households give to charity each year, and nearly a quarter of affluent individuals serve on at least one charity’s board of directors.

What this means is that many of your clients are likely attending (and perhaps even organizing) fundraisers for their favorite charities. Especially during the fall and winter months when many events are scheduled, you may get questions from clients about the rules for buying tickets and tables. Specifically, clients may wonder whether they can use their donor-advised funds at the Community Foundation for Greater Atlanta to pay for those tickets and tables.   

It’s helpful to take a step back here and revisit the principle that the IRS does not permit taxpayers to deduct charitable contributions that provide benefits back to the taxpayer. This principle becomes more complicated where donor-advised funds are concerned because the IRS frowns on donor-advised funds paying for any part of charitable fundraising event tickets, even if a portion is tax-deductible. 

If you’re interested in the background here, you can review IRS Notice 2017-73, which addresses a concept known as “bifurcated gifts,” meaning a portion of a gift is tax deductible and the other is not. The IRS has taken the position that Internal Revenue Code Section 4967 prohibits donor-advised grants from conferring “more than incidental” benefits to donor-advised fund holders. In its 2017 Notice, the IRS expressed its opinion that donor-advised fund grants that enable attendance or participation in a charity-sponsored event (such as buying tickets or a table) do indeed provide more than just an incidental benefit, even if the taxpayer pays out-of-pocket for the non-deductible portion of the ticket. Ever since the notice was released, it’s been on the radar of tax professionals, and many predict that the IRS will eventually issue clarifying regulations. 

What’s important to know here is that the full cost to attend events (both the tax-deductible and non-tax-deductible portions) must be paid from outside of your client’s donor-advised fund. Your client may be able to make an additional gift, above and beyond that amount, to the charity from a donor-advised fund if the client receives no more than an incidental benefit. (An example of an incidental benefit is listing your client’s name in the event program.) 

As with any question a client asks about charitable giving, please reach out to our team. It’s our honor to be your first call where philanthropy is concerned. In many cases, the Foundation can offer a solution. If not, we will point you and your client in the right direction.