Nonprofit Tax Considerations for Canceling or Postponing Events

by Matt Petroski
March 26, 2020

Concerns about the COVID-19 outbreak and social distancing requirements are causing many nonprofits to reevaluate planned fundraising events. Here are some things to keep in mind about these decisions and the potential tax implications of canceling or postponing your event.

The first step is to determine your path forward. Are you planning on postponing the event until a later date, canceling the event, or holding it virtually? It’s best to understand what your organization is capable of doing at this time and how your donors may continue to support your cause without a live event.

Regardless of what you decide, we recommend that you reach out to all donors and confirm their continued support or partial/complete refund. There is no one-size-fits-all solution.

If You Postpone

If you decide to postpone your event until later in 2020, there should not be a tax impact.

If You Cancel

If you must cancel your event, ideally all of your donors are contributing to your organization and the event cancellation should not change their desire to provide financial support. However, the reality is that some donors may be in a changed position and might request a refund.

There should be no tax impact if you decide to refund donations that occurred in 2020 within the same year.

If you refund a contribution that occurred in 2019 and you previously provided an acknowledgement letter, we suggest sending a letter to these donors informing them that:

  • There may be tax consequences.
  • They may want to consider filing an amended tax return to remove any deduction claimed during any of the three previous years as a result of their previously claimed contribution.
  • They should discuss options with their tax advisor.

Consider offering a refund of just the fair market value/quid pro quo amount included on their written acknowledgement letter so that their charitable contribution amount remains the same and your organization gets to keep what it would have netted from the event after costs.

If You Hold a Virtual Event

Virtual events may allow organizations to still conduct silent auctions or similar fundraising activities, despite the live event being canceled. While raffles may not be conducted online in California, auctions and other bidding-style events can be converted to online events that can take place live at a specific time or over the course of several days.

Since the fair market value the donor receives is significantly reduced without an in-person event, the donor’s net charitable contribution may be increased, or the organization could refund amounts that represent the fair market value that the donors ended up not receiving — for dinner and entertainment, for example.

Your Armanino teams are here and happy to help. Reach out to our experts if you have questions or need some assistance. For other information on managing your organization through disruption, visit our COVID-19 Resource Center.

March 26, 2020

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