A “quid pro quo” contribution is a donation in which the donor receives something of commercial value in return for their donation. For example, if a donor gives an organization $100 but in return receives a book bag valued at $30, the net contribution is $70. Gross donations exceeding $75 require the organization to provide the donor with a disclosure statement which informs them that the deductible portion of the donation is the net contribution. The disclosure must also include a good-faith estimate of the value of the item the donor received.
Quid pro quo is a phrase of Latin origin that means “something for something.” In English speaking countries, the term is often used to mean “a favor for a favor”; “give and take”; “tit for tat”; and “you scratch my back and I’ll scratch yours.” Quid pro quo agreements are sometimes viewed negatively. For example, a large financial house might alter poor stock ratings in order to obtain a company’s business. Officials have put rules in place in an attempt to ensure that firms put customers’ interested before their own. Viewed more positively however, a soft dollar agreement is seen as a good use of quid pro quo. For example, one firm may use another firms research or analysis for free and in exchange, they will purchase another service or product that the firm offers.
In legal usage, quid pro qo indicates that an item or a service has been traded in return for something of value, usually when the propriety or equity of the transaction is disputed. In the U.S., an exchange appears excessively one sided, courts in some jurisdictions may question whether a quid pro quo did actually exist and the contract may be void by law.
In political arenas, donors are legally allowed to support candidates that hold position with which the donors agree or directly benefit the donor. The term may also be used in legal situations to describe blackmail, where a person offer to refrain from some harmful conduct in return for valuable consideration.
In the startup and business world in general, quid pro quo is seen as a form of bartering in which no cash is exchanged, but in which needed services are provided in return for services a company can provide for another’s needs. It is particularly common in startup businesses where cash flow is limited, and there is an opportunity to get needed products or services without jeopardizing needed income. In this case, quid pro quo is a smart, legal business agreement for a startup in its infancy.
Lastly, quid pro quo – or the art of reciprocity – can be applied to professional networking in addition to business, politics, and legal terms. In this sense, a person can identify the need or pain point of a fellow professional that they want to establish a business relationship with. In order to facilitate a meaning introduction that initiates a successful professional relationship, the person can offer something of value, such as a link to a relevant article or a presentation that the person had created on the topic.
Click here for a link on IRS Quid Pro Quo Contributions