How much tax language belongs on the acknowledgment for a donor-advised fund grant?

Who the donor of record is when a DAF sends a check

When a grant arrives from a donor-advised fund, the money legally comes from the sponsoring organization, which is itself a public charity. The individual who recommended the grant already received their charitable deduction when they contributed to the fund, sometimes years earlier. That means the recommending donor cannot deduct the grant again, and your acknowledgment should not suggest that they can. The standard 'no goods or services were provided' tax language is meant for the party claiming a deduction, and in this case that party is nobody.

The right letter to the individual is a thank-you, not a tax receipt. Thank them for recommending the grant, name the fund and sponsor so they can match it to their own records, state the amount and date, and describe what it will support. Leave out phrases like 'tax-deductible contribution' and do not print the standard substantiation sentence as if it were a receipt to them. Some organizations send a separate formal acknowledgment to the sponsoring organization; most sponsors do not require it, but a brief letter confirming receipt is harmless and occasionally requested. Related: How do you write a receipt for an in-kind donation without stating a value?

Keep reading: Why Year End Receipts Matter to Donors, What a Compliant Donation Receipt Needs, Thank You Letters That Deepen Giving. See how TaxThank helps you year-end donation receipts and tax letters for nonprofits.

The benefit problem: what a DAF grant cannot pay for

The reason precision matters here is that DAF grants come with restrictions on what the recommending donor may receive. A grant cannot be used to buy gala tickets, memberships with substantial benefits, auction items, or anything else that gives the donor more than an incidental return. Sponsors ask the receiving charity to confirm this, and an acknowledgment that mentions benefits or shows a deductible portion can cause the sponsor to question or reverse the grant. If a donor tries to pay for a table at your event through their DAF, the answer is that the grant can cover the contribution portion only if the sponsor allows it, and many will not. Related: What should a nonprofit do when a donor receives dinner and auction items at a gala?

Pledges are the other trap. A donor who signed a legally binding pledge and then asks to satisfy it with a DAF grant is in a gray area that sponsors handle differently, and the guidance has shifted over time. The safe approach is to accept the grant as a gift, avoid language on your side that says the grant 'fulfilled' or 'paid' a binding pledge, and let the donor and sponsor sort out how they treat it. Non-binding intentions are fine; the trouble comes from enforceable commitments.

Matching gifts and IRA distributions follow their own logic

Corporate matching gifts look similar but work in reverse. The employee gave personally and gets a normal receipt for their own gift. The match is a separate contribution from the company, and the company is the donor of record for that amount. Acknowledge the company for the match, in writing, because their program administrator usually needs confirmation. Then tell the employee the match arrived, thank them for triggering it, and make it clear in their record that the match is not their contribution, so it never appears on their annual statement as if it were. Related: What a Compliant Donation Receipt Needs

Qualified charitable distributions from an IRA are a third case. A donor who is old enough to make one transfers money directly from the IRA to your organization, and the amount is excluded from their income rather than deducted. They still need a written acknowledgment, and it must confirm that no goods or services were provided, because any benefit at all disqualifies the distribution. So a QCD gets the full substantiation sentence, but avoid calling it deductible. Note that the check often comes from the IRA custodian with little identifying information, so build a habit of matching those to donors promptly.

Stock and other appreciated property

Gifts of publicly traded stock are deductible to the donor, so they get a real acknowledgment, but the letter should describe the shares and not value them. State the company name, the number of shares, and the date the shares were received in your brokerage account. The donor determines the value from the trading price on the gift date, and a value printed on your letter is unnecessary at best. Include the goods-or-services statement as you would for any gift.

The practical challenge with stock is identification. Shares arrive through a broker with no donor name attached in many cases, and an unmatched transfer sitting in your account is both a stewardship failure and a receipting failure. Ask donors to notify you before they transfer, keep a running log of expected gifts, and reconcile the brokerage account against it every week during December. When a gift is matched, send the acknowledgment quickly, because the date on your letter is part of the donor's evidence for when the gift was complete. Related: Thank You Letters That Deepen Giving