Thursday, December 17, 2009


The IRS, in a private ruling, stated scrip rebates donated to charity are deductible.

Charities purchase scrip from retailers (or a clearinghouse) at a discount and sell to members and/or the public at face value. Example: A local church purchases a $100 Wal-mart scrip in the form of a gift card for $98 and resells it for full price, $100, to a parishioner. The church retains the $2.

The private ruling says the IRS will consider the $2 a deductible charitable contribution. The situation addressed in the private ruling involved a charity that gave buyers of scrip the option of receiving a cash discount or letting the charity keep it. Many charities don’t give the option of taking a cash discount and I read the private ruling to mean the deduction is only allowed when the option to take the discount is present.

Donors need acknowledgement from the charity prior to filing if claiming a deduction. Rebates kept by the purchaser are not taxed, as the IRS considers this a tax free price reduction.

No comments:

Post a Comment