In donation scenarios for nonprofit organizations, donors sometimes voluntarily bear the credit card transaction fees (i.e., "convenience fees") incurred. This arrangement raises a series of practical issues regarding accounting treatment, receipt issuance, and tax characterization. Based on common industry practices, this article summarizes relevant key points for financial personnel's reference.

I. Accounting Recognition: Recorded as Donation Revenue or Expense Offset?

Regarding credit card fees voluntarily borne by donors, there are two prevailing views:

  • View A: As part of donation revenue—Combine the fee amount with the donation principal and recognize it as "donation revenue," while classifying the fees paid to the credit card institution as "fundraising expenses" or "administrative expenses." Under this method, both revenue and expenses are fully reflected, consistent with the gross reporting principle.
  • View B: As an expense offset (Wash transaction)—Directly deduct the fee from donation revenue and recognize revenue only on a net basis. This method simplifies processing but may understate the scale of revenue and expenses.

In practice, most nonprofit organizations tend to favorView A, as it better aligns with the accrual basis and transparency requirements and facilitates communication with donors. However, if the fee amount is immaterial, some organizations may adopt the net method to simplify accounting. It is recommended that organizations choose a consistent treatment based on their own accounting policies and the principle of materiality, and disclose it in the notes to the financial statements.

II. Issuance of Donation Receipts: Gross Amount or Itemized?

Should the donation receipt reflect the total amount actually paid by the donor, or distinguish between the "donation principal" and the "fee coverage"?

From a tax compliance perspective, the receipt should list the full amount actually paid by the donor (i.e., the total amount including the fee), because that amount is the total paid by the donor for charitable purposes. However, for clarity, the receipt may note "including credit card processing fee of XX yuan" to help donors understand the use of funds.

If itemized presentation is adopted, it should be noted whether the fee portion still qualifies as a charitable donation, depending on whether it constitutes a "necessary expense incurred to obtain the donation." If the fee is voluntarily paid in addition by the donor and the organization actually receives that amount, it is generally treated as part of the donation.

III. Tax Implications: Is the Fee of the Same Nature as the Donation?

Under U.S. federal individual income tax, charitable contribution deductions must satisfy the requirements of Section 170 of the Internal Revenue Code. If a donor voluntarily bears credit card fees that are paid directly to the organization (rather than to a third party) and the organization actually receives them, they are generally treated as part of the cash donation and are deductible. However, if the fee is deducted directly by the payment processor and only the net amount reaches the organization, the deduction may be limited to the net amount.

Specifically, if a donor pays $100 by credit card, of which $3 is a processing fee, and the organization actually receives $97, can the donor deduct $100? According to IRS guidance, if the fee is borne by the donor and the organization receives the full amount (i.e., the donor pays $103 and the organization receives $100), then the full $103 is deductible. If the organization only receives $97, the deduction is generally $97. Therefore, issuing a receipt for the gross amount (including the fee) helps donors claim the full deduction.

Additionally, if the fee is considered part of a "quid pro quo" arrangement (i.e., the donor receives something of equal value in return), adjustments are required under the rules. However, in a pure donation scenario, the fee does not constitute a return benefit and therefore does not affect the deduction.

IV. General Applicability of Convenience Fees

The above principles apply not only to nonprofit donations but also to convenience fees in other contexts (such as government services, tuition, etc.). If the payer voluntarily bears the convenience fee and the fee is directly related to the underlying transaction, it should generally be treated as part of the transaction consideration. However, if the convenience fee is paid to a third party (such as a payment platform), its accounting nature should be determined based on the contractual arrangement.

In summary, organizations are advised to establish clear accounting policies and specify the fee-bearing arrangement in donation agreements to reduce ambiguity.

Note: This article is based on U.S. nonprofit accounting practices and general tax principles; specific treatment should consider the regulations of the organization's jurisdiction and professional advice.