What Is an In-Kind Contribution?
4 OCT 2017
In-kind contributions, or gifts-in-kind, are non-monetary donations. These kinds of contributions, which may be small or large, are often assigned a financial value for the sake of tax, accounting and legal purposes. Two types of in-kind contributions exist: goods and services.
The donors of gifts-in-kind may be individuals or corporations. Individuals often donate small in-kind gifts such as food, blankets, clothing, books, toys, educational materials, personal hygiene items or used furniture. Businesses often make in-kind contributions on a larger scale. For instance, a car dealer may donate a vehicle to a charity or organization. An office supply chain might donate a piece of office equipment that the recipient organization or campaign can use. A painter might provide paint or brushes for a new community center building.
The recipients of in-kind contributions are often charities, non-profit organizations, schools, community centers and political campaigns. Such recipients use in-kind gifts or services and can eliminate the associated expenses from the budget. Sometimes recipients publish a wish list of wanted items. For instance, a YMCA branch might request gym equipment, benches for an outdoor garden, a school bus or other large gifts. Businesses respond to wish list requests by giving in-kind donations.
Professional or personal services may be given as in-kind contributions. For instance, a financial firm or law office may offer a charity a certain number of hours of free consulting. As another example, a bakery may offer to cater a charity event. Sometimes donors offer service in-kind contributions for auctions or lotteries to raise money for a non-profit initiative. For instance, a spa may offer two hours of spa services to be auctioned to charity event attendees.
4 Tracking Gifts
For tax, financial accounting and legal purposes, in-kind gifts are assigned a monetary value. This enables donors and recipients to track the gifts. For instance, political campaign in-kind contributions are regulated by the Federal Election Commission. Recipients are responsible for providing donors with a receipt for tax purposes.
Proper etiquette requires recipients of in-kind contributions to acknowledge gifts and, in some instances, to treat in-kind gifts as financial gifts. Recipients should thank in-kind contributors for goods or services donated and publish notice of such contributions along with any notices of financial donations. For instance, if donations are announced in a newspaper, in-kind contributions should be published in a special category for in-kind contributions or in the category of amount that the gift meets.