Tax rules for fire department silent auctions

First: which entity is running the auction?

"Fire department" is not one legal thing, and this is the question everything else depends on. Answer it before you open bidding, because the entity that receives the money is the entity that must appear on the receipts.

A municipal or fire district department

A government body. Contributions to a state or local government for exclusively public purposes are generally deductible, but the department may need council or commission approval to accept gifts, and the funds land in a public account with public accounting attached.

A volunteer fire company

Usually its own nonprofit corporation. Many hold 501(c)(3) status; some hold 501(c)(4). That distinction matters to your donors — contributions to a 501(c)(4) are generally not deductible as charitable contributions — and most companies never tell bidders which they are. Look up your own determination letter and put the answer on the auction page.

An auxiliary or relief association

Frequently a separate corporation with its own EIN, board and bank account. If the auxiliary runs the auction, the auxiliary receipts the bidders and the money is the auxiliary's — which may be exactly what you want, or may create a transfer problem when the department buys the equipment. Decide first.

The fair market value disclosure

If your organization is a qualifying charity, a bidder may deduct only the amount paid above the item's fair market value, and you are required to tell them that value at the time of the transaction. Put the value on every item page and state the rule in the auction description.

This is the single most common thing small departments miss, and it is not discretionary. It also helps you: a stated value gives bidders a reference point to bid past.

Donated items, and what the donor can claim

A business donating goods or services is making its own contribution, with its own rules, and donated services are treated differently from donated goods. Give every donor a written acknowledgement describing what they gave without assigning it a value — valuing the donation is the donor's responsibility, not yours, and departments that put a number on it are doing their donor no favours.

Raffles are not auctions

Raffle ticket purchases are generally not deductible at all, and raffles are regulated as charitable gaming in most states with registration requirements and, in some, restrictions on which entity types may hold one. If you are adding a raffle, read approvals and legal requirements first.

General auction rules and disclosures: silent auction rules and etiquette.

General information, not tax or legal advice for your department. Rules vary by jurisdiction and change — confirm with your state and your chief before you act on anything here.