Line 1. Contributions, Gifts, Grants, and Similar Amounts Received

A. What is included on line 1

• Report amounts received as voluntary contributions; for example, payments, or the part of any payment, for which the payer (donor) does not receive full retail value (fair market value) from the recipient (donee) organization. Contributions are reported on line 1 regardless of whether they are deductible by the contributor.

• Enter the gross amounts of contributions, gifts, grants, and bequests that the organization received from individuals, trusts, corporations, estates, affiliates, foundations, public charities, and other exempt organizations, or raised by an outside professional fundraiser.

• Report the value of noncash contributions at the time of the donation. For example, report the gross value of a donated car as of the time the car was received as a donation.

• Report all related expenses on lines 12 through 16. Show on line 13 professional fundraising fees relating to the gross amounts of contributions collected in the charity’s name by fundraisers.

Reporting line 1 in accordance with SFAS 116, Accounting for Contributions Received and Contributions Made, is acceptable but not required by the IRS. However, state law may require it. An organization that receives a grant to be paid in future years should, according to SFAS 116, report the grant’s present value on line 1. Accruals of present value increments to the unpaid grant should also be reported on line 1 in future years.

A1. Contributions can arise from special events when an excess payment is received for items offered. Fundraising activities relate to soliciting and receiving contributions. However, special fundraising activities such as dinners, door-to-door sales of merchandise, carnivals, and bingo games can produce both contributions and revenue. Report as a contribution, both on line 1 and on line 6a (within the parentheses), any amount received through such a special event that is greater than the fair market value (retail value) of the merchandise or services furnished by the organization to the contributor.

This situation usually occurs when organizations seek support from the public through solicitation programs that are in part special events or activities and are in part solicitations for contributions. The primary purpose of such solicitations is to receive contributions and not to sell the merchandise at its retail value even though this might produce a profit.

Example. An organization announces that anyone who contributes at least $40 to the organization can choose to receive a book worth $16 retail value. A person who gives $40, and who chooses the book, is really purchasing the book for $16 and also making a contribution of $24. The contribution of $24, which is the difference between the buyer’s payment and the $16 retail value of the book, would be reported on line 1 and again on line 6a (within the parentheses). The revenue received ($16 retail value of the book) would be reported in the right-hand column on line 6a. Any expenses directly relating to the sale of the book would be reported on line 6b. Any fundraising expenses relating to the contribution of $24 would be reported on lines 12 through 16.

If a contributor gives more than $40, that person would be making a larger contribution, the difference between the book’s retail value of $16 and the amount actually given. Rev. Rul. 67-246, 1967-2 C.B. 104, explains this principle in detail. See also the instructions for line 6 and Pub. 526, Charitable Contributions.

Caution: At the time of any solicitation or payment, organizations that are eligible to receive tax-deductible contributions should advise patrons of the amount deductible for federal tax purposes. See Pub. 1771, Charitable Contributions - Substantiation and Disclosure Requirements.

A2. Contributions can arise from special events when items of only nominal or insubstantial value are given or offered. If an organization offers goods or services of only nominal or insubstantial value through a special event, or distributes free, unordered, low-cost items to patrons, report the entire amount received for such benefits as a contribution on line 1. See also line 6, instruction B1 regarding nominal or insubstantial value. Report all related expenses on lines 12 through 16.

Benefits have a nominal or insubstantial value if the organization informs patrons how much of their payment is a deductible contribution, and either:

(1) The fair market value of all of the benefits received in connection with the payment is not more than 2% of the payment or $91, whichever is less, or

(2) The payment is $45.50 or more and the only benefits received in connection with the payment are token items (bookmarks, calendars, key chains, mugs, posters, T-shirts, etc.) bearing the organization's name or logo. The cost to the organization (as opposed to fair market value) of all benefits received by a donor must, in the aggregate, be $9.10 or less.

A3. Contributions in the form of membership dues. Include on line 1 membership dues and assessments to the extent they are contributions and not payments for benefits received. (See line 3, instruction C1.)

A4. Grants equivalent to contributions. Grants made to encourage an organization receiving the grant to carry on programs or activities that further the grant recipient’s exempt purposes are grants that are equivalent to contributions. Report them on line 1. The grantor may specify which of the recipient’s activities the grant may be used for, such as an adoption program or a disaster relief project.

A grant is still equivalent to a contribution if the grant recipient performs a service, or produces a work product, that benefits the grantor incidentally (but see line 1, instruction B1, below).

A5. Contributions or grants from governmental units. A grant or other payment from a governmental unit is treated as a grant equivalent to a contribution if its primary purpose is to enable the recipient to provide a service to, or maintain a facility for, the direct benefit of the public rather than to serve the direct and immediate needs of the grantor (even if the public pays part of the expense of providing the service or facility). (See also line 2, instruction D below.)

The following are examples of governmental grants and other payments that are treated as contributions and reported on line 1:

• Payments by a governmental unit for the construction or maintenance of library or museum facilities open to the public.

• Payments by a governmental unit to nursing homes to provide health care to their residents (but see treatment of Medicare, Medicaid, and other third-party reimbursements on behalf of specific individuals under the line 2 instructions below).

• Payments by a governmental unit to child placement or child guidance organizations under government programs to better serve children in the community.

The following examples illustrate the distinction between government payments reportable on lines 1 and 2:

• A payment by a governmental agency to a medical clinic to provide vaccinations to the general public is a contribution reported on line 1. A payment by a governmental agency to a medical clinic to provide vaccinations to employees of the agency is program service revenue reported on line 2.

• A payment by a governmental agency to an organization to provide job training and placement for disabled individuals is a contribution reported on line 1. A payment by a governmental agency to the same organization to operate the agency’s internal mail delivery system is program service revenue reported on line 2.

A6. Contributions received through other fundraising organizations. Contributions received indirectly from the public through solicitation campaigns conducted by federated fundraising agencies (such as United Way) are included on line 1.

A7. Contributions received from associated organizations. Include on line 1 amounts contributed by other organizations closely associated with the reporting organization. This includes contributions received from a parent organization, subordinate, or another organization having the same parent.

A8. Contributions from a commercial co-venture. Include amounts contributed by a commercial co-venture on line 1. These contributions are amounts received by the organization for allowing an outside organization (donor) or individual to use the recipient organization’s name in a sales promotion campaign, such as where the outside organization agrees to contribute 2% of all sales proceeds to the organization.

B. What is not included on line 1

B1. Grants that are payments for services are not contributions. A grant is a payment for services, and not a contribution, when the terms of the grant provide the grantor with a specific service, facility, or product, rather than providing a benefit to the general public or that part of the public served by the grant recipient. The recipient organization would report such a grant as income on line 2 (program service revenue).

B2. Donations of services or of use of property. Do not include the value of services donated to the organization, or of the free use of property (such as equipment or facilities), as contributions on line 1. However, for the optional reporting of such amounts, see the instruction for donated services in Part III.

Any unreimbursed expenses of officers, employees, or volunteers do not belong on the Form 990-EZ. See the explanations of charitable contributions and employee business expenses in Pub. 526, Charitable Contributions, and Pub. 463, Travel, Entertainment, Gift, and Car Expenses, respectively.

B3. Section 501(c)(9), (17), and (18) organizations. These organizations provide participants with life, sickness, accident, welfare and unemployment insurance, pension(s), or similar benefits, or a combination of these benefits. When such an organization receives payments from participants, or their employers, to provide these benefits, report the payments on line 2 as program service revenue, rather than on line 1 as contributions.

C. How to value noncash contributions. Report noncash contributions on line 1 at fair market (retail) value. If fair market value cannot be readily determined, use an appraised or estimated value. See also the instructions for Part II of Schedule B.

D. Schedule of contributors. Attach Schedule B if required. See the Specific Instructions for Completing the Heading of Form 990-EZ, Item H.

Tip: Section 501(c)(3) organizations must compute the amount of contributions according to the above instructions in preparing the support schedule in Part II or III of Schedule A (Form 990 or 990-EZ), Public Charity Status and Public Support.