Can A Check Dated In One Calendar Year Be Credited To A Different Calendar Year For Tax Deduction Purposes?

Our Ask An Expert series features real questions answered by Claire Axelrad, J.D., CFRE, our very own Fundraising Coach, also known as Charity Clairity. Today’s question comes from a nonprofit employee who wants advice on whether they can credit a donation in 2023 if the check was dated 2024:

Dear Charity Clairity,

A donor advised in early December a $20,000 check was mailed to us. We informed her in the 3rd week of December we had not received it. She then advised she cancelled the first check and sent a new one. We received the new check dated 1/12/24 and deposited it.

The question is whether any type of amends can be made to credit the donation to 2023, if the check was dated 2024? This was a personal check, but we were also given notice by an investment advisor. We want to know whether we, as the nonprofit, need to make remedies with the donor or does the responsibility lie with the donor if a postdate correction needs to be made?

— Want to keep donor happy

Dear Want to keep donor happy,

Of course you do! But you don’t write the law, and you must stay within it.

For starters, please allow me to refer you to a previous question I answered on this topic. SEE In Which Year Are Gifts Made On Or Before December 31, But Received In January, Counted?

You may be familiar with the expression “possession is 9/10ths of the law.” Well, when it comes to donations, possession is all of the law!

Generally, possession is determined by who has control of the money at any point in time. Whenever the gift leaves the donor’s possession – and they can’t get it back – that’s when the gift is considered made. But it’s a bit tricky.

Delivered when mailed

Clearly, if the donor had mailed cash, she wouldn’t be able to get the money back once she’d dropped the envelope stuffed with bills into the mailbox. So, the gift would be made at that time. However, evidence of when the gift is mailed via USPS is whenever the envelope is postmarked. This is known as the Treasury Department’s “delivered when mailed” rule. So, if an envelope sits in a mailbox over a weekend, and it isn’t postmarked until after the 1st of the year, that’s when the donation is technically deemed made. The postmark rules.

NOTE: You might reasonably think when a donor mails a check (not cash) they still have agency to cancel that check up until the time the charity deposits or cashes that check. In fact, that’s what happened in your situation. Nonetheless, for purposes of gift substantiation, the “delivered when mailed” rule applies to checks sent via USPS as well.

With gifts (cash or check) sent by a private mail service (e.g., UPS or FedEx), the “delivered as mailed” rule does not apply. This is because it is presumed, up until the date the gift appears on your doorstop, the donor still has possession as evidenced by the fact they can still contact the third party and cancel the transaction. Once the charity receives the mail, even though the donor might technically still be able to cancel a check, it is presumed the charity had the right to immediately cash or deposit it (whether they did or not is immaterial). If the check sent via private carrier arrived before December 31st, the donor’s deduction would fall in that calendar year. If it arrived after that date, the deduction would properly belong in the year the charity assumed possession.

Payable when dated

In your case, you neither received nor was the check dated in the calendar year ending December 31st. You note when you received the replacement check it was postdated for January 12th of the current (not previous) calendar year. The date of mailing will not make any difference if the check is postdated. A postdated check is not an immediately payable contribution, but is a promise to pay on the date shown.

Since you could not take possession until mid-January, the gift is considered made in the new calendar year.

Impact of third-party advice

Finally, the fact the donor’s investment advisor merely informed you a gift would be made at some future time has no bearing on when the gift came into your possession. It’s useful in that you’ve got somebody else to connect with in order to try to effect your donor’s wishes, but the fact a donor tells an advisor to do something is not dispositive. The gift must still be delivered into your possession for the gift to be deemed made.

What should you do?

If in the future a donor or advisor notifies you a gift has been mailed, and you notice it has not been received, you might:

1. Suggest the donor hand deliver the check to you prior to December 31st.
2. Suggest the donor send the check via registered or certified mail, return receipt requested.
3. Offer to personally pick the check up at the donor’s place of work or residence.

For now, hopefully this helps you explain to your donor why this gift must be credited to the current tax year, both for their tax purposes and for your charity’s recordkeeping purposes and financials. It may not be what they had hoped for, but sometimes these things happen. By explaining you’ve done your due diligence, and are sorry you don’t have better news this time, hopefully you’ll be able to maintain a good relationship with your generous supporter.

— Charity Clairity (Please use a pseudonym if you prefer to be anonymous when you submit your own question, like “Want to keep donor happy” did.)

This is not intended as professional legal or tax advice. Please consult your own advisors!